Abstract
This study is aimed to investigate the causal relationship between exchange rates
and Karachi Stock Exchange (KSE) 100 Index. The Jarque-Bera test was used to
check normality of both the variables. The results indicated that data series of
variables do not follow the normal distribution which further required checking
the stationarity of variables for which the ADF test was used. The results
suggested that at level variables are non-stationary but are stationary at first
difference. Accordingly, Johansen Test of Cointegration was used to test longterm relationship between the variables which indicated absence of such
relationship. Finally, Granger Causality Test was applied to check the causal
relationship between the variables which showed that exchange rates do not
Granger cause KSE 100 Index and vice versa.
Anjum Ihsan, Qadar Bakhsh Baloch, Shahid Jan Kakakhel. (2015) Relationship between Exchange Rates and Stock Market Index: Evidence from the Pakistani Stock Market, Abasyn Journal of Social Sciences, Volume-08, Issue-1.
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