International Influence on Stock Markets in Pakistan

Abstract

Stock markets are one of essential tools to attract foreign investments. In the field of business finance stock market plays very important role; it provides a platform for business organization & investors. Volatility in stock market is because of both national & international factors like money supply, inflation, recession, exchange rate, foreign investment, migration of people and denominated of foreign currency. This study investigates the effect of international factors; exchange rate & foreign investment, on stock market of Pakistan. Statistical analysis showed direct relationship between stock markets and international factors. Using data from previous 25 years (i.e. 1990-2015), it is found that stock market is more vulnerable to exchange rates as compared to foreign investments.

Keywords: Exchange rate, foreign direct investment (FDI), Stock index prices

JEL classification: F10, F21, F31