basic template and presentation on the final report. can be used for help but is never a final wording.

1. The impact of Interest rate and
Exchange rate on Stock Prices. A
Pakistani perspective. (July 2007-
March 2012)
Muhammad Taimur

2. Introduction
• Interest rate and exchange rate are the key
macroeconomic variables of the economy (Ahmed,
Raoof, & Rehman, 2010).
• Changes in these variables can affect the
profitability and returns of the investors.
• Emergence of new capital markets, gradual
abolishment of capital inflow barriers and
adaptation of flexible exchange rate has highlighted
the need (Okpara & Odionye, 2012).

3. Problem Statement
To investigate the impact of Interest rate
and Exchange rate on Stock prices in
Pakistan.

4. Literature Review
Research Title
Stock Prices and Exchange Rates: Are they Related? (Rasheed & Naeem, 2002)
Evidence from South Asian Countries.
Exchange rate and stock price interactions in (Abdalla & Murinde, 1997)
emerging financial markets: evidence on India,
Korea, Pakistan and the Philippines.
Dynamic relationship between stock prices and (Nieha & Leeb, 2001)
exchange rates for G-7 countries.
Linkage between Stock Market Prices and Exchange (Farooq & Keung, 2002)
Rate: A Causality Analysis for Pakistan.
Dollar exchange rate and stock price: evidence (Kim, 2003)
from multivariate cointegration and error
correction model.

5. The determinants of the variability of (Grossman & Shiller, 2001)
stock market prices.
The Exchange-Rate Exposure of U.S. (Jorion, 1990)
Multinationals.
A bivariate causality between stock (Granger, Huang, & Yang, 2000)
prices and exchange rates: evidence
from recent Asian flu
Estimating the effects of Interest Rates (Çifter & Ozun, 2002)
on Share Prices Using Multi-scale
Causality Test in Emerging Markets:
Evidence from Turkey

6. The Relationship between Exchange (Kurihara, 2006)
Rate and Stock Prices during the
Quantitative Easing Policy in Japan
Analysis of the relationship between (okpara & Odionye, 2012)
exchange rate and stock prices :
Evidence from Nigeria
Is exchange rate volatility influenced (Kansas, 2002)
by stock return volatility? Evidence
from the US, the UK and Japan
Relationship between Interest Rate (Alam & Uddin, 2009)
and Stock Price: Empirical Evidence
from Developed and Developing
Countries

7. Theoretical Framework
Exchange
Rate
Stock Prices
Interest
Rate
Independent
Variables Dependent Variable

8. Hypothesis
H1O : Exchange rate does not effect stock
prices.
H1: Exchange rate effects stock prices.
H2O: Interest rate does not effect stock prices.
H2: Interest rate significantly effects stock
prices.

9. Objective of the Research
This research aims to investigate the effect of
exchange rate on stock prices and interest rate
on stock prices.

10. Significance of the Research
• This research can help SBP to adjust interest
rate to attract local and foreign investors.
• This research can be used by other developing
countries as well.
• It can serve as a base for conducting further
studies and as a secondary data.

11. Scope of the study
• The study is limited only to the financial sector
of KSE 100 however it can be applied to the
financial sector in other countries as well.

12. Methodology
• Population includes the financial services sector
of KSE 100.
• Randomly selected sample including 7 financial
companies.

13. Data Collection
• The study uses monthly data for the period July
2007 – March 2012.
• Stock prices will be observed from KSE 100 .
• 90 days T-Bill rate is selected as a representative
of interest rate (Zafar, Urooj, & Durrani, 2008).
It will be taken from SBP website
http://www.sbp.org.pk
Exchange rate will be taken from SBP website as
well.

14. Regression model
(Zafar, Urooj, & Durrani, 2008)

15. Referencing
• Abdalla, I., & Murinde, V. (1997). Exchange rate and stock price
interactions in emerging financial markets: evidence on India,
Korea, Pakistan and the Philippines. Applied Financial Economics .
• Ahmed, I., Raoof, A., & Rehman, R. u. (2010). Do Interest Rate,
Exchange Rate effect Stock Returns? A Pakistani perspective.
International Research Journal of Finance and Economics .
• Alam, M., & Uddin, G. (2009). Relationship between Interest Rate
and Stock Price: Empirical evidence from developed and developing
countries. International journal of business and management .
• Çifter, A., & Ozun, A. (2002). Estimating the effects of Interest rates
on share prices using multi-scale causality test in emerging markets:
Evidence from Turkey. The quarterly review of economics and
finance .

16. • Farooq, M. T., & Keung, W. W. (2002). Linkage between stock market
prices and exchange rate: A causality analysis for Pakistan.
• Granger, C., Huang, B. N., & Yang, C. W. (2000). A bivariate causality
between stock prices and exchange rates: evidence from recent Asian
flu. The Quarterly Review of Economics and Finance , 337-354.
• Grossman, S. J., & Shiller, R. J. (2001). The determinants of the
variability of stock market prices. NBER working paper series.
• Jorion, P. (1990). The exchange-rate exposure of U.S. multinationals.
The journal of business , 331-345.
• Kansas, A. (2002). Is exchange rate volatility influenced by stock
return volatility? Evidence from the US, the UK and Japan. Applied
Economics Letters , 501-503.
• Kim, k.-h. (2003). Dollar exchange rate and stock price: evidence from
multivariate cointegration and error correction model. Review of
Financial Economics , 301-313.

17. • Kurihara, Y. (2006). The relationship between exchange rate and
stock prices during the Quantitative Easing Policy in Japan.
INTERNATIONAL JOURNAL OF BUSINESS .
• Nieha, C. C., & Leeb, C. F. (2001). Dynamic relationship between
stock prices and exchange rates for G-7 countries. The quarterly
review of economics and finance , 477-490.
• Okpara, g. c., & Odionye, J. C. (2012). Analysis of the relationship
between exchange rate and stock prices: Evidence from Nigeria.
International Journal of Current Research , 4 (03), 175-183.
• Rasheed, A., & Naeem, M. (2002). Stock Prices and Exchange Rates:
Are they Related? Evidence from South Asian Countries. The
Pakistan Development Review , 535-550.
• Zafar, N., Urooj, f., & Durrani, T. K. (2008). Interest rate volatility
and stock return and volatility. European Journal of Economics,
Finance and Administrative Sciences .