Impact of Interest Rate on Stock Market; Evidence from Pakistani Market

This research paper was an endeavor to make a model, to find out the connection involving stock market and interest rate (Pakistani market) and to run certain tests related to statistical analysis. These tests run with the help of month end closing stock prices of Karachi Stock Exchange and interest rates of previous ten years i.e. Jan 2004 to Dec 2013. Correlation, Regression analysis and descriptive analysis were run to find out the blow of interest rate on stock market of Pakistan. Performance of Pakistani Stock market is highly dependent on political situation. The most important factor of any country’s economy is its Stock market. But there are certain factors which have negative and positive impact on stock markets. Here I am considering one factor that has impact these are inversely related with each other i.e. one increases other decreases and vice versa.