These results reveal that identification of direction of relationship between
the macroeconomic variables and capital market behavior facilitates the investors
in taking effective investment decisions as by estimating the expected trends in
exchange rates and interest they can estimate the future direction of equity prices
and can allocate their resources more efficiently. Similarly, architects of monetary
policy should be careful in revision of interest rates as capital market responds to
such decisions in the form of reduction of prices. Similarly, Central bank should also
consider the impact of money supply on capital markets as has significant
relationship with dynamic of equity returns. As under efficient market hypothesis
capital markets respond to arrival of new information so macroeconomic policies
should be designed to provide stability to the capital market.