Factors Affecting Stock Prices: a Case Study of Karachi Stock Exchange (kse)

This study examines the company internal factors and macro-economic variables affecting stock prices in the Karachi Stock Exchange of Pakistan. Internal factors are earnings per share and dividend per share. The macro-economic variables are represented by the money supply, consumer price index, interest rates, and gross domestic product. A sample of 15 companies is selected from the financial sector in KSE. Eight years data is employed in this study which extends from the year 2001 to the year 20008. A Panel Data Regression with its two types: Random Effects and Fixed Effects models is used. Further, Weighted Least Squares (WLS) Regression is used for analysis in order to remove the problem of Autocorrelation. The results indicate the positive and statistically significant relation of money supply and earning per share with stock prices. The positive result of earning per share is consistent with the study of Chang, Hsu-Ling, Yahn-Shir Chen, Chi-Wei Su, and Ya-Wen Chang, (2008) while the positive result of money supply is consistent with the studies of Gan, C., M. Lee, H. H. Au Yong and J. Zhang (2006), Husain, Fazal and Mahmood, Tariq (1999) and Al-Tamini, Hussein A. (2007). The results for GDP are positive, and for interest rates are negative but not statistically significant. Future work in this area should quantitatively analyze and explain the influence of political events on the Karachi Stock Exchange.