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Abstract
The objective of this paper is to examine the short-run and long-run dynamic relationship between foreign portfolio investments (FPI) and stock prices of Pakistan. This study first ever attempts in the context of Pakistan economy to investigate the foreign portfolio investment and its impact on the domestic stock market. The surge in FPI in the developing countries is relatively due to growth of stock markets in these countries, liberalisation of their economies, high returns on investment, trade openness, improved communication and global technology. This study used annual time series data starting from 1984 to 2016. The autoregressive distributed lag (ARDL) method used for both the long-run and short-run relationship between FPI and various policy variables. All the results are statistically significant except the exchange rate and the model is best fitted which shows the diagnostic and stability test.
Note
Availability of data and material
The author will provide all the data used in this research on request.
Disclosure statement
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Notes
1 For detail see ‘Volatility Spillover between the Stock Market and the Foreign Exchange Market in Pakistan’ by Qayyum & Kemal, Citation2006. This study suggests ‘the returns of stock market are sensitive to the returns as well as the volatility of foreign exchange Market’.
Additional information
Notes on contributors
Malik Shahzad Shabbir
Mr Malik Shahzad Shabbir, visiting Lecturer at University of Lahore. Previously he has provided his services as Finance Manager in Eid Almabadee Est, Makkah Saudi Arabia. Mr Malik has published numerous articles in National and International reputed journals.
Iftikhar Muhammad
Mr Iftikhar Muhammad, PhD scholar (Economics) at Ibn Haldun University, Istanbul, Turkey.