International Journal of Management Research and Emerging Sciences Volume 8 Issue 1 (2018) PP. 18-28 1 THE EFFECT OF STOCK MARKETS OF MAJOR DEVELOPED COUNTRIES ON PAKISTAN STOCK MARKET Dr. Jamil Ahmed Chaudary 1 , Muqddas Rehman 2 , Muhammad Ramzan Mehar 3 Mariam Nazeer 4 ABSTRACT The study tests the relationship among stock markets of selected developed countries and Pakistan stock market for 12 years from the period Jan. 1994 to Dec. 2016. The objective of this research is to analyze the long-run relationship of stock markets of USA, Japan, and Australia with Pakistan stock market. Researcher includes KSE 100 Index as dependent variable and S&P 500, ASX 200, and Nikkei 225 as independent variable for this particular study and applies Augmented Dickey-Fuller Test (ADFT), Co-integration test, OLS regression and VECM test on secondary data of weekly index prices with total observation of 1200 to find out long run and causal relation between selected variables. Results of models indicate that models are valid and are applicable in the stock markets of selected countries. By applying these tests researchers conclude that all independent and dependent variables have a positive and significant relationship during the proposed period of this particular study. Key words: Co-integration, stock markets, KSE 100 Index, VECM and ADFT 1. INTRODUCTION 1.1 Background of the Study The creating market objective is to accomplish financial development and advancement. Notwithstanding numerous different variables, Investment assumes a basic part in accomplishing the financial development and improvement of a nation. Reserve funds create venture. Reserve funds are constantly equivalent to speculation. The finest place to utilize the saving in kind of speculation is the market of capital securities. The limit of capital markets is to drive the hold subsidizes in an effective and capable way towards the wander portfolios and associates in working up a theory culture in the country. This market is divided into two markets named as primary market and secondary market. Commonly, stock market or equity market is known as secondary market. Stock market or exchange is a place where traders can buy and sell their shares, bonds and other financial instruments. Only listed companies’ can traded their securities like, unit trusts, derivatives, portfolio investment products and bonds in stock exchange. Today stock market is considered as the most important part of the global economy. Different markets of the world depend on each other’s stock market for the economic growth and development. However securities exchange isn't generally assume a critical part in worldwide economy since it is new marvel. Stock trade was established first time in London in 1801 with the name of London Stock Exchange yet it was not permitted to organizations to exchange shares over this trade until 1825. It was an extremely constrained trade. Because of this confinement the stock trade established in New York (NYSE) in 1817 was considered as a critical crossroads in the history (Godfrey, Granger, & Morgenstern, 1964; Agmon, 1972). However, today almost every country of the world has its own stock exchange where the companies of these countries trading on regular basis. In Pakistan the stock trade was established on September 48, 1947 by the name of Karachi Stock Exchange. Karachi Stock Exchange was recorded among 10 best securities exchanges of the world. As demonstrated by the examination of Bloomberg, the Pakistani securities trade record was the third-best performer stock trade on the planet since 2009. Presently stock trade in Pakistan is working by the name of Pakistan Stock Exchange After the merger of individual stock trades of Karachi, Lahore and Islamabad which was built up on 11 January 2016. Here the inquiry is the reason securities exchanges have turned into an enthusiastic power for the financial development of the worldwide nations? In the cutting edge age, securities exchange can be discovered anyplace on the planet and one can't prevent the worldwide significance from securing securities exchanges. Consistently, millions or trillions of dollars are exchanged on securities exchanges everywhere throughout the world and they genuinely considered as the motor of industrialist economy (Berument & Ince, 2005). 1.2 Problem Statement The problem which is focused by researcher in this particular study is to know the impact of securities markets of developed countries on Pakistan stock market. It’s also true that stock market consider a main indicator for economic growth of any country. If companies of any country perform better and manage well their resources and provide the investors with benefits or chance to increase their return, then it can interacts different investors from the world to invest in their home country, it lead to increase in stock market growth due to this increase in economy of any countries. However there are several other things that affect the securities markets of different countries, such as; political and economic instabilities, behavior of investor towards particular market, and 1 Director Faculty of Management and Administration Sciences, University of Sialkot, 2 Assistant Professor, Hailey College of Commerce, muqadas.hcc@pu.edu.pk 3 Lecturer at Department of Business Management and Administrative Sciences University of Sialkot, ramzan_mehar@hotmail.com 4 Lecturer at Department of Business Management and Administrative Sciences University of Sialkot,