IMPACT OF EXCHANGE RATE, OIL PRICES, AND STOCK MARKET: EVIDENCE FROM PAKISTAN STOCK EXCHANGE (TIME SERIES DATA ANALYSIS)

Abstract

This article analyzes the correlation between oil prices, the exchange rate, and returns on the KSE 100 index over a short period. This article takes a time series approach, looking at the exchange rate, oil prices, and KSE 100 index of the Pakistan stock market daily from the first month of 2010 through the last month of 2018. This study performed a statistical analysis by using a VAR model, a cointegration test, and the ADF test. The exchange rate of the rupee to the dollar has a negligible correlation with the KSE 100 index. In contrast, oil prices correlate highly with stock market returns and have a short-term positive influence on the index.