The Relation between Stock Prices and Money Supply in Pakistan: An Investigation

Journal of Independent Studies and Research (JISR) Volume 5, Number2, July 2007

50+20 Research Paper

3 Pages Posted: 25 May 2012

See all articles by Nawaz Ahmad

Nawaz Ahmad

RTS (Research, Trainings, and Solutions); Institute of Business Management (IoBM)

Fazal Husain

Quaid-i-Azam University - Pakistan Institute of Development Economics (PIDE)

Date Written: December 13, 2006

Abstract

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

Ahmad, Nawaz and Husain, Fazal, The Relation between Stock Prices and Money Supply in Pakistan: An Investigation (December 13, 2006). Journal of Independent Studies and Research (JISR) Volume 5, Number2, July 2007; 50+20 Research Paper . Available at SSRN: https://ssrn.com/abstract=2065919

Nawaz Ahmad (Contact Author)

RTS (Research, Trainings, and Solutions) ( email )

9th Nishat Lane, DHA 6
9th Nishat Lane, DHA 6
Karachi, Sindh 75500
Pakistan
00923009292422 (Phone)

Institute of Business Management (IoBM) ( email )

Plot # 84
Korangi Creek
Karachi, Sindh 75190
Pakistan

HOME PAGE: http://www.faculty.iobm.edu.pk/staff/nawaz-ahmad/

Fazal Husain

Quaid-i-Azam University - Pakistan Institute of Development Economics (PIDE) ( email )

Quaid-i-Azam University Campus
P.O.Box 1091
Islamabad, Federal Capital 44000
Pakistan

HOME PAGE: http://www.pide.org.pk

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