Impact of Foreign Direct Investment on Volatility of Stock Market (An Evidence From Pakistani Market)

Abstract

Investment markets are an important source of developing the economy of a country. Stock market is the fundamental part of capital market and it is associated with the investments, savings and economic growth of the country. Some growing countries are emerging with their tactics of bringing changes in their economies by considering the capital flows because of the global market as this market provides a vast opportunity to all the countries for their economic flourishment. This change affects the Stock market and stock market is one of the major part of the developed markets throughout the globe. Karachi Stock Exchange (KSE) is one of the major role player in a Pakistan's economy. And because of its high index FDI investors are getting opportunities to boom themselves and our country is also growing because of their roles. Primary cause of this study is to find out the impact of Foreign Direct Investment on the stock market and also to examine the other factors in development of stock markets. Summary: Foreign Direct Investment is best known for its capital development for a country they are investing. Pakistan is one of those countries experiencing Foreign Direct Investment to take a part in increasing capital structure. Stock market index of Pakistan is at peak because of both; local and foreign Investors showing interest in variety of businesses. Mainly, Foreign Direct Investments (FDIs) are becoming important resource for improving the economy of a country. This research includes broader concept of understanding relationships between Foreign Direct Investments (FDIs) and the stock Markets. Moreover, this research highlights the actual interest played by Stock Market and FDI and the other determinants affecting the both variables. Different tools and techniques have been used to find out the effect of FDI on the Stock Market. Numbers of tests have been used to determine the effect between the both.