IMPACT OF INTEREST RATE, EXCHANGE RATE AND INFLATION ON STOCK RETURNS OF KSE 100 INDEX

This research covers the impact of interest rate, exchange rate and inflation on stock returns of KSE 100 index. All the three macro variables which is taken under consideration are considered very important for the economy of any country and any change among these variables effect the economy in various ways and the regulatory authority take steps in order to make changes in their policies which can affect the economy in a positive way. Ten years monthly data from 31st July, 2001 to Jun 30th2010 is taken in consideration. Multiple regression model is applied on the data and the result shows that there is a weak relationship between the dependent variable and independent variables. The impact of interest rate and inflation is insignificant on stock returns of KSE 100 index while the exchange rate has significant impact on stock returns of KSE 100 index