Impact of macroeconomic variables on Stock Prices: Industry Level Analysis

This study examines the relationship between stock prices and interest rate, exchange rate and consumer price index (CPI). 4 different industries were selected for this study on the basis of data availability, these industries included oil and gas, chemical, cement and insurance industry. The data for the selected industries and economic variables were obtained for the period of 6 years (24 quarters). Regression analysis was used to analyze the impact of exchange rate, interest rate and consumer price index on stock returns. Stock index is used as a dependent variable and the macro- economic variables are used as independent variables. Results of the study show that the impact of interest rate on oil and gas, chemical and cement industry are insignificant, while it has significant effect on insurance industry. When the impact of consumer price index is determined it shows sig- nificant effect on oil and gas, chemical, cement industry and insurance industry respectively. The exchange rate showed significant negative effect on all 4 industries.