The Relation between Stock Prices and Money Supply in Pakistan: An Investigation
Journal of Independent Studies and Research (JISR) Volume 5, Number2, July 2007
3 Pages Posted: 25 May 2012
Date Written: December 13, 2006
This paper examines the causal relationship between money supply and stock prices. The analysis indicates a long-run relationship between stock prices and money supply. The analysis further indicates unidirectional causality from Money Supply to KSE 100 Index both in the short run and in the long run. This implies that the stock market is not efficient with respect to M2 and past information regarding monetary assets can be helpful to predict movements in stock prices.
Keywords: Money Supply, Stock returns
JEL Classification: E1, E4, G1
Suggested Citation: Suggested Citation