THE IMPACT OF COMMODITIES PRICE ON STOCK MARKET PRICE: EVIDENCE FROM PAKISTAN

Abstract

The purpose of this study is to investigate the impact of oil price and gold price fluctuation on stock prices in Pakistan. The time series daily data was collected from the period of 1st Jan 2012 to 25th May 2021. The data was collected from Investing.com and Pakistan stock exchange (PSX). The dependent variable was the stock price and the independent variables were oil price and gold price. Descriptive statistics, unit root test, co-integration, correlation, ordinary least square regression, variance inflation factor, and Granger Casualty test were applied for this research. The results supported the previous studies' results, and predictions and developed hypotheses H1 and H2. The results found that gold and oil price have an inverse relationship with the stock market price of Pakistan. The results suggested that due to more cost of transportation, oil prices rise, which affect negatively stock prices. High oil prices negatively affect the stock price of Pakistan. Moreover, high gold prices have a negative effect stock market, suggesting that gold is a safe investment during high stock market prices. Moreover, the results found that the relation between oil price and stock price is uni-directional. The researchers could predict the stock market price by observing oil prices.