Impact of Risk Free Rate on Stock Market Return: A Case Study of Karachi Stock Exchange
Posted: 11 Jan 2009 Last revised: 3 Jun 2009
Date Written: January 8, 2009
The current study looked at the relationship between risk free rate and stock market return. A five year monthly basis time series data from 2003-2007 of T-bills and KSE-100 index were taken for research study. For the analysis of data, simple regression model approach was applied. Stock market return was taken as dependent variable whereas Risk free rates as independent variables. Pearson Correlation Matrix was also obtained through correlation model. The results suggested that risk free rates had no effect on dependant variable. Furthermore, no correlation between risk free rate and stock market return was found. Consequently, a bivirate relationship cannot exist between risk free rate and stock market return, indicating that the stock market return is a function of more variables than risk free rate.
Keywords: relationship, risk free rate, stock market return
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