EFFECT OF EXCHANGE RATE ON STOCK RETURN

Abstract

The exchange rate and stock market are the two fundamental financial markets in the world. These two markets are playing key role in an international business all over the world. It is necessary to understand the relationship between the both markets so that the investors may be able to invest in a better way by taking the minimum risk. This paper investigates the Causal relationship between the exchange rate and stock market of Pakistan. PSE-100 index is used as a substitute of Stock Prices while currency rate of Pak Rupee against US Dollar (PKR/US$) is taken for exchange rate exposure. The data is on Daily basis and the time period is from January 2015 to December 2019. The findings of the research indicate that a positive relationship exists between stock price and exchange rate and both the variables are dependent on each other.