Economics at your fingertips  

The Determinants of Stock Prices in Pakistan

Mehr-un-Nisa and Mohammad Nishat
Additional contact information
Mehr-un-Nisa: Ph.D Scholar at University of Karachi, Karachi, Pakistan
Mohammad Nishat: Professor Department of Finance and Economics, Institute of Business Administration, Karachi, Pakistan

Asian Economic and Financial Review, 2011, vol. 1, issue 4, 276-291

Abstract: Stock Investment is always a risky proposition and investors are reluctant to invest in Stock Market. If they came to know about the exact factors influencing the stock prices, they will invest in stocks confidently. This study examines the empirical relationship between the stock prices, financial fundamentals and macroeconomic factors in Karachi Stock Exchange. By applying the dynamic panel Generalized Method of Moments (GMM) technique on the data of 221 firms during 1995-2006, the analysis attempts to obtain efficient parameter estimates and to check the consistency of the link between stock price behavior, company fundamentals and macroeconomic factors. Several studies have been conducted to identify the factors of stock prices for a variety of countries, and the results have been mixed. It is found that previous behavior of stock prices, company size, previous earnings per share are the most important factors. In addition, macroeconomic indicators like, GDP growth, rate of interest and financial depth have significant relationship with the stock prices. Market to book value, share turnover ratio and inflation can also influence the stock price behavior. The corporate reforms of 2002 are responsible of increase in stock prices from 2002 to 2006. Investors in Pakistan have to decide which stock should be purchased. The results of this study will provide guideline to the investors in stock selection. While taking decisions they should take into account company informations as well as macroeconomic situation of the country simultaneously. The companies can set their policies and strategies in the light of relatively important factors, for business survival and success. The possible impact of macroeconomic factors may help the policy makers while setting monetary and fiscal policies.

Keywords: Stock; Market. (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Asian Economic and Financial Review is currently edited by Dr. Qazi Muhammad Adnan Hye

More articles in Asian Economic and Financial Review from Asian Economic and Social Society 2637 E Atlantic Blvd #43110 Pompano Beach, FL 33062, USA.
Bibliographic data for series maintained by Chan Hoi Yan ().

Page updated 2019-08-25
Handle: RePEc:asi:aeafrj:2011:p:276-291