The foreign exchange rate fluctuations do create an
impact on stock returns, which has been
investigated for non-financial listed Pakistani firms. The real
effective exchange rate has been used as the true measure of foreign
exchange exposure. The modelled econometric equation includes;
firm size, firm liquidity, money supply and inflation as predictors
of stock returns. Twenty-five non-financial listed firms have been
evaluated for the study period 2004 to 2013, which signifies the
military regime era proceeded by peoples party rule in Pakistan.
Financial data analysis, including; ADF unit root and Johansen
Co-integration tests, have been applied to evaluate financial data,
which further led to correlation, descriptive stats and panel data
regression analysis. The results have suggested a very weak
relationship between stock returns and foreign exchange exposure.
Therefore, sample non-financial listed firms have not been foreign
exchange exposed; however, firm size, liquidity, money supply and
inflation rates have definitely created an impact on stock returns.
1-Syed Muhammad Ali Tirmizi Associate Professor, Department of Business Administration, Faculty of Management Sciences, Foundation University Islamabad, Pakistan. 2-Muhammad Jawad Haider PhD Scholar, Faculty of Management Sciences, International Islamic University Islamabad, Pakistan.3-Shahab Ud Din Assistant Professor, Department of Business Management, Karakoram International University, Ghizer Campus, Gilgit-Baltistan, Pakistan.