THE ROLE OF MACROECONOMIC STABILITY IN SHAPING TEXTILE SECTOR INFLUENCE ON THE PAKISTAN STOCK EXCHANGE

Abstract

The research paper examines how the textile business affects the functionality of the Pakistan Stock Exchange (PSX) during the period of 2020-2024 through the correlation between the indicators at the firm level and macroeconomic factors. The analysis of the above factors uses 110 observations, which consist of 110 quarterly observations, and uses a simple correlation and multiple regressions to evaluate the effect of earnings per share (EPS), inflation, rate, interest rate, market capitalization growth, and trading volume on the PSX_ALL index. Findings indicate that inflation and interest rates have negative and significant impact on PSX_ALL, again the stock market is very delicate to macroeconomic conditions. EPS is positive and significant and this means that profitability in the textile sector increases the market performance. Liquidity indices, on the other hand, show negative relationship with market capitalization growth as a result of valuation effect of equity dilution or over-pricing during market conditions, and trading volume record insignificant relationship. The results match well with the previous sources that argued that macroeconomic factors will dominate firm specific indicators in the emerging markets.