Determining the relation of stock prices with exchange rates: a study on saarc countries

Purpose: The study aims to determine and analyze if the prices of stock are related with exchange rates for the SAARC countries. Methodology: GMM model is used by the researcher to seek if exchange rates and stock prices are related to each other for SAARC. This GMM methodology is adopted because our independent variable of exchange rate has the problem of endogamy. The data for different variables used in the study will be obtained from yahoo finance and oando.com. Findings: The findings reveal a significant negative relationship between the two factors in case of Sri Lanka and India. However, in case of Pakistan, coefficient of exchange rates is positively and significantly correlated with stock prices. Originality: The study suggests that both variables are significantly correlated with each other for the SAARC countries, however for India and Sri Lanka this relationship is found to be negative but positive for Pakistan.