The Effect of Oil Price on Stock Market Returns with Moderating Effect of Foreign Direct Investment & Foreign Portfolio Investment: Evidence from Pakistan Stock Market

Usman, M. and Siddiqui, D. A. (2019).The Effect of Oil Price on Stock Market Returns with Moderating Effect of Foreign Direct Investment & Foreign Portfolio Investment: Evidence from Pakistan Stock Market. Asian Journal of Economic Modelling, 7(2), 45-61

18 Pages Posted: 30 Jun 2019

See all articles by Muhammad Usman

Muhammad Usman

Karachi University Business School, Students

Danish Ahmed Siddiqui

University of Karachi - Karachi University Business School

Date Written: May 31, 2019

Abstract

This paper investigates the moderating impact of FDI & FPI in the association of macro-economic variables along with Oil prices & Index returns. Monthly data has been used from the period 2005 to 2018. Efficient unit root & break point unit root tests results indicate that all variables are stationary at 1st difference. Co -integration test results signify the presence of long-run relationship in model. GARCH (1,1) model has been applied for analyzing the volatility in the data series. Furthermore, least square method is employed to check dependency & fitness level of model. In order to investigate the moderating impact, regression technique has been applied. Findings of LSM technique indicate that index returns aren’t significantly dependent on macro-economic variables on 1st difference of data series because variables predicting behavior has been changed with respect to stationarity of data. Exchange rate & interest rate have negative significant association with index returns. Oil prices & foreign direct investment have positive relationship with stock market return. FDI & FPI are unable to moderate significantly model dynamics. For estimating the panel regression model, 11 different sectors data is used and results show that exchange rate & oil prices have positive significant impact on sector wise price change but interest rate has significant negative association.

Keywords: Exchange Rate, Interest rate, Foreign direct & portfolio investment, Stock market return, Oil Prices, Co-integration, Stationarity, GARCH

JEL Classification: C510; E440; G110

Suggested Citation

Usman, Muhammad and Siddiqui, Danish Ahmed, The Effect of Oil Price on Stock Market Returns with Moderating Effect of Foreign Direct Investment & Foreign Portfolio Investment: Evidence from Pakistan Stock Market (May 31, 2019). Usman, M. and Siddiqui, D. A. (2019).The Effect of Oil Price on Stock Market Returns with Moderating Effect of Foreign Direct Investment & Foreign Portfolio Investment: Evidence from Pakistan Stock Market. Asian Journal of Economic Modelling, 7(2), 45-61, Available at SSRN: https://ssrn.com/abstract=3397253

Muhammad Usman

Karachi University Business School, Students ( email )

Karachi
Pakistan

Danish Ahmed Siddiqui (Contact Author)

University of Karachi - Karachi University Business School ( email )

University Road
Karachi, Sindh 75270
Pakistan
3333485884 (Phone)

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