Abstract:
Short term interest rate and market return are two crucial measurement for formulating
current economic stability. This study has been conducted to find out the relationship
and impact of short-term interest rate on stock market return. Monthly data has been
collected from the period of January 2006 to January 2017. Three month Treasury bill
rate was used as a tool for the short term interest rate and applied all share price index
(ASPI) for stock market return. And also, inflation rate, money supply and exchange
rate were employed as control variable. The data were analyzed and hypotheses were
tested through descriptive statistics, correlation analysis and regression analysis. The
finding revealed that, there is a negative significant impact of short-term interest rate
on market return and also interest rate and exchange rate have negative impact except
money supply on market return. These results have implications for investors, financial
analyst, fund managers and policy makers.
