UNVEILING THE NEXUS BETWEEN CAPITAL INFLOWS, GLOBAL POLICY UNCERTAINTY, AND STOCK MARKET RETURNS: EVIDENCE FROM AN EMERGING ECONOMY

Authors

  • Dr. Asma Zeeshan Assistant Professor, Bahria University, Islamabad.
  • Qurra Tul Ain Assistant Professor, Department of Management Sciences, University of South Asia, Lahore.
  • Dr. Sajjad Ahmed Faculty of Management and Social Sciences, Lasbela University of Agriculture, Water and Marine Sciences Uthal, Balochistan, Pakistan.
  • Adeel Arshad Lecturer, Department of Business Administration, University of Kotli, Azad Kashmir. Adeel Arshad Lecturer, Department of Business Administration, University of Kotli, Azad Kashmir.
  • Urooj Azhar Senior Lecturer, Accounting and Finance, Bahria University, Islamabad.

Abstract

This research investigates the short-run and long-run macroeconomic determinants of the Pakistani stock returns under the impact of capital inflows and global economic policy uncertainty by using the ARDL method and the monthly data for the period of 2015 to 2024, The set of macroeconomic variables utilized in the study are the stock market price indexes of Pakistan’s PSX100 index, PSX Financial Index (PSXFIN) and the PSX Industrial Index (IND), Industrial Production Index (IP), Real Effective Exchange Rate (RER), Consumer Price Index (CPI), Interest Rate (INTR), capital inflows which is the sum of foreign direct and portfolio investment coming to Turkey (FDIPORT) and the Global Economic Policy Uncertainty index (GEPU). The ARDL estimation results reveal that in the long-run the PSX stock returns are positively affected from the changes in IP, RER, CPI and FDIPORT. The effect of the changes in GEPU on the stock returns is negative. The long-run determinants of the PSX stock returns are the changes in IPI, RER, and CPI and the EPU. The effect of the changes in the INTR on the stock returns is insignificant. The impact of the changes in RER on stock returns is significantly positive for the PSX100 and PSXFIN indexes, but has no significant effect on the PSXIND stock returns. The estimation results suggest that the capital flows and global economic policy uncertainty are essential factors for the Pakistani stock returns.

Keywords: Capital Inflows, Global Policy Uncertainty, Stock Market Returns, Emerging Markets, India, VAR Model, Financial Stability.

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Published

2025-09-11

How to Cite

Dr. Asma Zeeshan, Qurra Tul Ain, Dr. Sajjad Ahmed, Adeel Arshad Lecturer, Department of Business Administration, University of Kotli, Azad Kashmir., & Urooj Azhar. (2025). UNVEILING THE NEXUS BETWEEN CAPITAL INFLOWS, GLOBAL POLICY UNCERTAINTY, AND STOCK MARKET RETURNS: EVIDENCE FROM AN EMERGING ECONOMY. Journal of Management Science Research Review, 4(3), 1413–1437. Retrieved from https://jmsrr.com/index.php/Journal/article/view/142

Issue

Vol. 4 No. 3 (2025): Journal of Management Science Research Review

Section

Articles