Title: Are interest rates alone enough to understand stock returns in the Islamic Republic of Pakistan?

Authors: Imtiaz Badshah; Maaheen Ahmad; Khalifa Hmood Jaber

Addresses: Faculty of Business, Languages and Social Sciences, Østfold University College, Norway ' NUST Business School, National University of Sciences and Technology, Islamabad, Pakistan ' College of Business Administration, Al Falah University, UAE

Abstract: The purpose of this paper is to understand the volatility of interest rates and the relationship between interest rates and stock returns under three political regimes in Pakistan. The wealth of literature discussing the volatility of interest rates and stock returns provided the theoretical basis for this inquiry. This research is therefore deductive in nature and situated within a positivist philosophical paradigm. This research is unique in its methodological approach, dividing the study period into three short periods (2002-2008, 2008-2013 and 2013-2016) based upon the political regimes in the country, which leads to interesting findings. Regression analyses are used to investigate the relationship between interest rates and stock returns. This research contributes additional insights into the relationship between interest rates and stock returns in Pakistan. Factors, such as political regimes, the relationship between political regimes and international investors and organisations, and the law and order situation etc play greater role.

Keywords: interest rates; stock returns; volatility; quantitative approach; politics; monetary policy; Pakistan.

DOI: 10.1504/IJEPEE.2019.102775

International Journal of Economic Policy in Emerging Economies, 2019 Vol.12 No.3, pp.227 - 242

Received: 25 Jun 2018
Accepted: 19 Nov 2018
Published online: 03 Oct 2019 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article