ASSOCIATION OF EXCHANGE RATE, INTEREST RATE AND MARKET RISK WITH ACCOUNTING VARIABLES: AN ANALYSIS OF BANKING SECTOR OF PAKISTAN

This study has two major purposes. First, Pakistani banking institutions are evaluated by the market risk, exchange rate and interest rate sensitivities. Secondly, it is also based on the accounting based financial ratios as well as market measure of risk. This study is also related to the Japanese banking intuitions study which has been written by Elyasiani and Mansur (2005). First, we employ Ordinary Least Square (OLS) to estimate the coefficient of market, exchange and interest rate for permit of time-varying risk premia, the OLS model incorporates the non-linearity in the bank stock return modeling. First, pragmatic results designate that market variables are significant while exchange rate rarely significant and interest rate non-significant for all the banks which are included in this study