STOCK PRICES, REAL SECTOR AND THE CAUSAL ANALYSIS: THE CASE OF PAKISTAN

Fazal Husain ()
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Fazal Husain: Insitute of Business and Technology (BIZTEK

IBT Journal of Business Studies (JBS), 2006, vol. 2, issue 2, 179-185

Abstract: This paper reexamines the causal relationship between stock prices and the variables representing the real sector of the Pakistani economy.Using annual data from 1959/60 to 2004/05, examining the stochastic properties of the variables used in the analysis, and taking care of the shifts in the series due to the start of the economic liberalization program in the early 1990s, the paper investigates the causal relations between stock prices and variables like real Gross Domestic Product GDP, real consumption expenditure, and real investment spending.The analysis indicates the presence of a long run relationship between stock prices and the real sector variables.Regarding the cause and effect relationship, the analysis indicates a oneway causation from the real sector to stock prices implying that the stock market in Pakistan is still not that developed to influence the real sector of the economy.Hence the market cannot be characterized as the leading indicator of the economic activity in Pakistan.

Keywords: Stock Prices; Causal Relations; Real Sector; Economic Activity; Pakistan (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:aib:ibtjbs:v:2:y:2006:i:2:p:179-185

DOI: 10.46745/ilma.ibtjbs.2006.22.6

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