Analyzing factors affecting the performance of Pakistan Stock Exchange

Abstract

The paper is aimed to determine the factors that affect the performance of Pakistan Stock Market. The study identifies the determinants which cause volatility in the Stock Market. Pakistan Stock Exchange, being the only platform to provide equity funding for corporations, has got major attention of investors over the decades. After several stock market crises such as March 2008 where investors lost millions and billions of rupees, it is important for both investors and investees to know the major factors that drive Stock Exchange performance. The research is qualitative in nature and specifically content analysis tool is used to analyze data. The interviews are conducted from various people who keep on participating in stock markets i.e. fund managers, research analysts, directors, CEOs, equity traders of various brokerage houses, fund management and asset management companies. After interviews, major themes are covered based on repeated answers such as fundamental factors, macroeconomic factors, political instability, foreign investment and other factors.

The research concludes that the major drivers of the stock market are fundamental factors such as corporate earnings, dividend yield, bonus and company size, macroeconomic factors such as interest rates, inflation and balance of payment, foreign investment which is indicated by Foreign Portfolio Investment (FIPI) and Foreign Direct Investment (FDI) and political instability in the country.