Impact of Interest Rate and Money Supply On Nepalese Stock Market

Table of Contents
Chapter: 1 ...................................................................................................................................... 2
Introduction ................................................................................................................................. 2
Background ................................................................................................................................. 3
Problem statement ....................................................................................................................... 4
Research questions and objectives .............................................................................................. 4
Expected outcomes...................................................................................................................... 5
Chapter: 2 ...................................................................................................................................... 6
Literature review ......................................................................................................................... 6
Critical analysis of the existing studies ....................................................................................... 6
Methodology ............................................................................................................................... 7
Components of Methodology: ........................................................................................................ 9
Research Design: ......................................................................................................................... 9
Data Scaling: ............................................................................................................................... 9
Data augmentation..................................................................................................................... 10
Linear Regression ...................................................................................................................... 11
Correlation matrix ..................................................................................................................... 12
Data visualization ...................................................................................................................... 27
Hardware and Software requirements ........................................................................................... 33
Method .......................................................................................................................................... 34
Research procedure ....................................................................................................................... 34
Limitation of Research .................................................................................................................. 35
Ethical Consideration .................................................................................................................... 36
Chapter 4 ..................................................................................................................................... 36
Experimental Setup ................................................................................................................... 36
Results ........................................................................................................................................... 37
Chapter 5 ..................................................................................................................................... 37
Conclusion................................................................................................................................. 37
Future Work .............................................................................................................................. 38
References .................................................................................................................................... 39
Chapter: 1
Introduction
The main stock exchange in Nepal is called the Nepal Stock Exchange (NEPSE). It is
situated in Kathmandu's Singha Durbar Plaza and was founded in 1993. The Securities Board of
Nepal (SEBON), the top regulating body for Nepal's securities markets, oversees NEPSE.The
purpose of NEPSE is to offer a platform for trading different financial items, including as equities,
bonds, and mutual funds. It gives investors the chance to invest in these securities and enables
businesses to raise funds by issuing shares to the general public (Dr. K.C. and N.K. 2023)
Numerous public and private businesses that satisfy the exchange's listing requirements are
listed on NEPSE. There were a number of firms listed on NEPSE in a variety of industries,
including banking, insurance, manufacturing, trade, and more, as of my most recent information
update in September 2021. NEPSE is open on Sunday through Thursday. Local time, the market
is open from 11:00 AM to 3:30 PM. The NEPSE maintains a number of indexes to monitor market
activity. The NEPSE Index and the Sensitive Index (or Sensitive Float Index) are the two most
important indexes according to (K. Aashutosh . 2019). The Sensitive Index only takes into account
firms that satisfy certain requirements, such as market size and liquidity, whereas the NEPSE Index
covers all listed companies.
The Nepal Stock Exchange (NEPSE), established in 1993 and located in Kathmandu's
Singha Durbar Plaza, serves as the primary stock exchange in Nepal. Oversight of NEPSE
operations falls under the purview of the Securities Board of Nepal (SEBON), the regulatory
authority governing Nepal's securities markets.
NEPSE plays a pivotal role in facilitating the trading of various financial instruments,
encompassing equities, bonds, and mutual funds. This platform not only provides opportunities
for investors to engage in securities trading but also allows businesses to raise capital by issuing
shares to the public (Dr. K.C. and N.K., 2023).A diverse array of both public and private
enterprises that meet NEPSE's listing criteria are featured on the exchange. As of my latest
available information in September 2021, NEPSE showcased companies spanning multiple
sectors, including banking, insurance, manufacturing, and trade, among others. Operating from
Sunday through Thursday, the market operates from 11:00 AM to 3:30 PM local time.
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IMPACT OF INTEREST RATE AND MONEY SUPPLY ON NEPALESE STOCK MARKET
To monitor market activity, NEPSE maintains several key indices. The NEPSE Index and the
Sensitive Index (or Sensitive Float Index) hold particular significance according to (K. Aashutosh,
2019). While the Sensitive Index focuses solely on companies meeting specific criteria, such as
market size and liquidity, the NEPSE Index encompasses all listed companies. This dual-index
approach provides a comprehensive view of the market's performance and stability.
Background
The 'NEPSE Online Trading System (NOTS)' was an automated trading platform utilized
by NEPSE. The electronic trading of securities is made possible by this method. Individual
investors, institutional investors, and overseas investors are just a few of the types of investors that
NEPSE serves. To engage in the stock market, however, foreign investors are subject to a number
of limitations and need permission from the Nepal Rastra Bank (Arya R. 2020).
NEPSE works within the SEBON-established legal framework. The fairness and openness
of the Nepali securities market are the responsibility of SEBON, according to (Arya R.
2020).Participants in the market, including both individual investors and institutional players,
perform their own research and analysis before making an investment, just like they would in any
stock exchange. Risks come with stock market investing. There are no returns guarantees, and the
value of securities can change. Investors should perform their due research and, if necessary, speak
with financial professionals “ by Arya R. (2020).
In an Initial Public Offering (IPO), new securities are first released on the primary market.
By offering shares to the general public, businesses raise cash. The secondary market is where
investors exchange previously issued securities. It serves as the daily trade activity' main emphasis.
Retail investors that trade stocks for their own personal investments are known as
individual investors. Investing enormous quantities of money on behalf of their clients are
institutions like mutual funds, insurance firms, and pension funds. The NEPSE is open to foreign
investors, however there are several limitations and Nepal Rastra Bank authorisation is needed “
by Ganesh P. (2022).
Both in terms of the number of listed businesses and market value, the NEPSE has grown
significantly over time. Regulatory changes: To improve market integrity and safeguard investor
interests, the SEBON has put in place a number of regulatory changes.
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Liquidity issues have plagued the NEPSE, especially for those equities with modest
trading volumes. Both market players and regulators continue to struggle with ensuring rigorous
adherence to regulatory norms (Ganesh P. 2022).
To draw more investors and deepen the market, the NEPSE is seeking to enhance the scope
of its product and service offerings, according to (Ganesh P. 2022). The NEPSE is being
progressively integrated with global markets, which may make it more appealing to overseas
investors.
Problem statement
Examine how important macroeconomic variables, including as GDP, inflation, and
interest rates, affect the performance and conduct of the NEPSE stock market “ by Jeetendra D.
(2018).
It requires a thorough investigation of how more general economic factors affect the
operation of the stock market in Nepal in order to analyze the impact of important macroeconomic
indicators, such as Gross Domestic Product (GDP), according to (Jeetendra D. 2018). inflation,
and interest rates, on the performance and behavior of the Nepal Stock Exchange (NEPSE).
A strong GDP growth rate frequently indicates a booming economy. Businesses typically
operate well in such an environment, resulting in increased corporate earnings. The stock market
may then draw investors as a result. Higher consumer spending can result from increased economic
activity, which helps the NEPSE's consumer-centric businesses operate better “ by Mukti, K. B.
(2010).
Bullish attitude in the stock market is often linked to positive GDP growth rates. A
booming economy may be seen by investors as a chance for lucrative investments. In anticipation
of anticipated market upswings brought on by economic development, institutional investors may
devote a higher share of their portfolios to equities.
Research questions and objectives

A researcher's precise questions or interrogations that they want to answer through their
study are known as research questions. These inquiries serve to focus the study and direct the
research process, according to (Mukti, K. B. 2010). They have to be succinct, precise, and pertinent
to the study's subject.
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The exact, quantifiable aims that a researcher intends to accomplish through their study are
called objectives, according to (Parkash K. 2020). They serve as both standards for measuring the
study's progress and a clear road map for the research process. These objectives provide the
research specific, measurable aims. Additionally, they provide as a foundation for the
methodological, data gathering, and analytical procedures. Additionally, they support maintaining
the research's focus and alignment with its goal “ by Parkash K. (2020).
What effect does the growth rate of the Gross Domestic Product (GDP) have on the broad
performance of the NEPSE stock market?
What connection exists between the NEPSE market's stock values and inflation rates?
How do interest rate changes impact the mindset of investors and trading activity on the NEPSE
stock market?
Do changes in the most important macroeconomic indicators have any appreciable long- or short-
term influence on the values of stocks on the NEPSE market?
Expected outcomes
Several expected results may be predicted based on the theory, which examined how
important macroeconomic factors including the Gross Domestic Product (GDP), inflation, and
interest rates affected the performance and behavior of the NEPSE stock market. In the beginning,
it is predicted that changes in the GDP growth rate will have a noticeable effect on the overall “
by Raju A. (2022).
Performance of the NEPSE stock market. Strong GDP growth is anticipated to positively
correlate with increased market activity, which might include increased trading volumes and
perhaps rising stock prices. Second, the findings could indicate a complicated relationship between
inflation rates and stock market activity in the setting of the NEPSE, according to (Raju A. 2022).
Increased inflation could impact changes in stock prices, lower purchasing power, and market
sentiment. Additionally, it is anticipated that changes in interest rates will have a considerable
impact on investor behavior. Rising rates have the potential to decrease demand for stocks by
raising the cost of borrowing. Additionally, the analysis may pinpoint particular NEPSE market
segments that are most susceptible to changes in key macroeconomic indices. The research is
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positioned to provide important insights for investors, decision-makers, and financial analysts
working in the Nepalese financial market by exploring these interrelationships “ by Raju A. (2022).
Chapter: 2
Literature review
This research offers a thorough investigation of how macroeconomic factors and the
NEPSE relate to one another. To investigate the short- and long-term dynamics of GDP growth,
inflation, interest rates, and the stock market index, a Vector Autoregressive (VAR) model is used.
The results show that GDP growth and interest rates have a big influence on Nepal's stock market
performance. According to the paper "Macroeconomic Factors and Nepalese Stock Market" by
Chhetri, R. B. and Adhikary, B. K. (2017), policymakers should constantly monitor these aspects
for efficient management of the economy and financial markets “ by Sita C. (2020).
To examine the connection between macroeconomic factors and stock prices in the
NEPSE, Pandey's research uses a Granger causality test and a Vector Error Correction Model
(VECM). Indicating that changes in economic development might affect stock market
performance and vice versa, the study uncovers evidence of bi-directional causation between GDP
growth and stock prices. Additionally, both short- and long-term effects of inflation and interest
rates are proven to be considerable on stock values. The Influence of Macroeconomic Factors on
Stock Prices in the United the Nepal Stock Exchange" by Pandey, B. R. (2018)
Critical analysis of the existing studies

The Autoregressive Distributed Lag (ARDL) method is used in Bista and Bhattarai's study
to examine how macroeconomic factors affect the NEPSE. Inflation, interest rates, and GDP
growth are major predictors of Nepal's stock market performance, according to the research. The
report "Macroeconomic Determinants of Stock Market Performance in Nepal" also emphasizes
the necessity for coordinated monetary and fiscal policies to stabilize the economy and promote a
favorable environment for stock market growth. by Bista, R. K. and Bhattarai, S. (2019):
6|Page
Using a VECM framework, this study explores the dynamic link between macroeconomic
factors and the NEPSE. According to the study, Nepal's stock market behavior is substantially
influenced by GDP growth and inflation. The study also shows that short-term stock price changes
are impacted by interest rate shocks. The article "Impact of Macroeconomic Factors on Stock
Market Performance: Evidence from Nepal" offers useful insights for stock market investors in
Nepal. by Neupane, S. and “ by Pandey, B. R. (2020):
In Acharya's work, the effect of macroeconomic factors on the NEPSE is examined using
the Granger causality test and the Error Correction Model (ECM). The study emphasizes that the
stock market's performance is significantly influenced by GDP growth, inflation, and interest rates.
The research also recommends that authorities concentrate on sustaining macroeconomic
stability to provide a positive atmosphere for the Nepali stock market "An Empirical
Analysis of the Relationship between Macroeconomic Variables and Stock Market Performance
in Nepal" by Acharya, S. (2019)
Collectively, these studies help us gain a more complex picture of how macroeconomic
issues affect the NEPSE's performance and behavior. For those involved in the Nepalese financial
market, such as investors, decision-makers, and financial analysts, they provide insightful
information.
Methodology
The systematic and structured process used to collect, analyze, and interpret data in order
to address research questions or test hypotheses is referred to as methodology in the context of
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research. It is a crucial component of every research project since it offers a precise framework for
the study's execution and guarantees that the findings are accurate, trustworthy, and repeatable “
by Sita C. (2020). Here is a detailed explanation of methodology and its importance:
Methodology's importance involves ensuring rigor and credibility, as well as replication

and generalizability. provides direction for data collection and analysis, addresses ethical issues,
optimizes resource use, reduces bias and confounding variables, is adaptable to various research
designs, makes it easier to interpret data, and so on” by Sita C. (2020).
A clearly defined methodology makes sure that the study is carried out in a methodical and
thorough way. By providing a standardized framework, it reduces biases and mistakes in the data
gathering process “ by Sita C. (2020). This raises the study's credibility and dependability. Other
researchers can duplicate the study and validate the findings thanks to a transparent methodology.
This is essential for proving the reliability of results and advancing the body of knowledge in the
topic. It describes the particular methods, equipment, and steps that will be taken to gather and
process the data. This keeps data collecting consistent and standardized, ensuring that the findings
are accurate and trustworthy “ by Sita C. (2020).
The ethical aspects of methodology cover things like gaining informed permission,
preserving participant privacy, and guaranteeing data confidentiality. For doing research in an
ethical and responsible manner, this is essential. A well-designed technique aids in the effective
allocation of time, money, and personnel. It makes sure that resources are used wisely to
accomplish the goals of the study “by Xian-Rong T. (2022, December 9)
Methodology aids in reducing possible biases and controlling for confounding variables by
precisely specifying the study strategy, sample techniques, and data collection procedures. This
enhances the study's internal validity. Different study designs, such as experimental, observational,
qualitative, and quantitative, can be accommodated by methodology. According to their study
goals, it gives researchers the freedom to select the best strategy “Xian-Rong T. (2022, December
9)
A framework for data analysis is provided by a well-structured technique. In order to ensure

that the results are significant and pertinent to the research objectives, it describes the statistical or
8|Page
analytical procedures that will be utilized to analyze the data “by Xian-Rong T. (2022, December
9)
Components of Methodology:
Research Design:
This provides an overview of the study's general design and organization, including its
method—experimental, observational, qualitative, or quantitative. Sampling Techniques includes
information about the population, the sampling frame, and the exact sampling techniques, as well
as how participants or samples will be chosen. The tools, devices, or methods that will be utilized
to collect data are described in the section on data collection methods (examples: surveys,
interviews, observations, experiments).The methods and procedures that will be used to examine
the data that has been gathered, including any statistical tests or software applications, are
described in depth in Data Analysis Procedures “by Hirshleifer, D. (2001).
Concerns regarding participant permission, privacy, secrecy, and any possible hazards or
advantages of the study are all covered under ethical considerations. Any restrictions or bounds
that could affect the study's findings or generalizability are acknowledged under restrictions and
Delimitations “ by Hirshleifer, D. (2001).
A essential component of research is methodology, which offers a planned framework for

carrying out a study. It makes sure that studies are carried out assiduously, morally, and in a way
that permits the replication and confirmation of results. In the end, a well-designed technique
improves the caliber and validity of study findings “by Hirshleifer, D. (2001).
Data Scaling:
When working with several variables that have distinct measurement units or scales, data
scaling is an essential element in your research project's technique. Data scaling can assist
guarantee that each indicator is given equal weight in the study of your research topic, which
examines the impact of numerous macroeconomic variables on the NEPSE stock market. Here is
a description of one possible use for data scaling “by Sunil, J. (2021). Data scaling's goal is to
uniformly scale or range all the variables so that they may be directly compared. This is crucial
when considering variables with widely disparate numerical ranges, such as GDP (measured in
trillions), inflation rates (measured in percentages), and interest rates (measured in percentages or
basis points).
9|Page
Data augmentation
Is a technique commonly used in machine learning and data analysis to increase the size
and diversity of a dataset by applying various transformations to the existing data? In the context
of your research question, "Analyze the influence of key macroeconomic indicators on the
performance and behavior of the NEPSE stock market," data augmentation can be applied to
enhance the robustness and representativeness of the dataset used for analysis “Sunil, J. (2021).
Generating Synthetic Data Points:
One way to augment data is by generating synthetic data points that are plausible within
the context of the study. For example, you could use statistical techniques to create additional data
points for GDP, inflation, and interest rates based on the existing dataset “by Sunil, J. (2021).
Time Series Resampling:
If your dataset contains time series data, you can use resampling techniques to generate
additional time points. This can provide a more comprehensive view of how macroeconomic
indicators evolve over time and their impact on the stock market “Kinni, F. K.-Y. (2015).
Adding Noise:
Introducing controlled noise to the existing data can simulate variability or uncertainty in
the macroeconomic indicators. This can help account for unexpected or unpredictable events that
may influence the stock market “by Kinni, F. K.-Y. (2015).
Simulating Scenarios:
You can use economic models or simulations to generate alternative scenarios for GDP
growth, inflation rates, and interest rates. This can help test the robustness of your findings under
different economic conditions.
Bootstrapping:
Bootstrapping involves resampling from the existing dataset with replacement to create
new samples. This can be particularly useful for estimating confidence intervals and assessing the
stability of your results “by Warr, R. S. (2007).
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Feature Engineering:
Transforming or combining existing features can also be considered a form of data

augmentation. For instance, you could create new variables that represent economic indices or
ratios based on the original indicators “by Warr, R. S. (2007).
The Linear Regression is used for the predicting a stock price using NEPSE index and NEPSE
Market Capitalization attributes.
Linear Regression
Summary statistics
Obs.
Obs.
withou
Observati with Minimu Maximu Std.
Variable t Mean
ons missin m m deviation
missin
g data
g data
73769.5631319 71929.3 465491.7 221171.7 136356.0

12 0 12
694 33 49 83 94
11569.3380796 10139.5 27512.62 16692.70

12 0 12 5182.149
648 15 3 2
Table: 1 summary statistics
These abridged statistics include two distinct variables. There are no missing data for the
first variable, identified as 73769.5631319694, which contains a total of 12 observations. The
values vary from 71,929.333 at the least to 465,491.749 at the highest. This variable's mean value
is around 221,171.783, and its standard deviation is approximately 136,356.094. This suggests that
there is a large range of data points around the mean.
There are no missing data in the second variable, 11569.3380796648, which similarly has
12 observations. Its values vary from 10,139.515 at the least to 27,512.623 at the maximum. This
variable's mean value is around 16,692.702, and its standard deviation is roughly 5,182.149. With
11 | P a g e
a smaller standard deviation suggesting less variability, this shows that the data points in this
variable are significantly closer to the mean than those in the first variable. These summary
statistics offer a succinct description of the distribution and properties of the two variables as a
whole.
Correlation matrix
11569.3380796648 73769.5631319694
11569.3380796648 1 0.810
73769.5631319694 0.810 1
Table: 2 correlation matrix
The 11569.3380796648 and 73769.5631319694 correlation coefficients between the two

variables are shown in the correlation matrix. The degree and direction of a linear link between
two variables are measured by correlation. Given that a variable is always perfectly correlated with
itself, the correlation between 11569.3380796648 and itself in this instance is 1, which is the
maximum conceivable correlation. On to the correlation, which is around 0.810 between
11569.3380796648 and 73769.5631319694. This suggests that these two variables have a
significant positive linear connection. The tendency is for both variables to rise when one rises,
and vice versa. An ideal positive linear relationship would have a correlation of 1, therefore a result
of 0.810 indicates a significant, if imperfect, association between the two variables. It's crucial to
understand that correlation
Regression of variable 73769.5631319694
A regression analysis using the variable with the label "73769.5631319694" is shown by
the sentence "Regression of variable 73769.5631319694." In order to comprehend and measure
the link between a dependent variable (in this example, 73769.56313119694), one or more
independent variables, and a dependent variable, regression analysis is a statistical approach.
In this situation, it could be interesting to look at the relationships between changes in the
variable 73769.5631319694 and those in other variables. The regression analysis would entail
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determining the regression model—a mathematical equation—that best captures this connection.
Based on the values of the independent variables, this equation may then be used to forecast values
for the variable of interest. It's crucial to remember that the specifics of the regression analysis—
including the kind of regression model employed, the inclusion of additional independent
variables, and the interpretation of coefficients—would rely on the context and goal of the
investigation. Additionally, some statistical assumptions are made during regression analysis, and
the findings should be interpreted properly.
Goodness of fit statistics (73769.5631319694)
Observations 12
Sum of
12
weights
DF 10
R² 0.656
Adjusted R² 0.621
MSE 7040280079.971
RMSE 83906.377
MAPE 31.922
DW 1.746
Cp 2.000
AIC 273.911
SBC 274.881
PC 0.482
Table: 3 goodness of fit statistics
The "Goodness of Fit" statistics offer a thorough assessment of how well the regression
model using the variable 73769.5631319694 performed. These metrics provide vital information
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about the model's performance. First of all, "Observations" (n=12) denote the quantity of data
points taken into account for the study. Regression studies frequently assign equal weight to each
observation, as shown by the "Sum of Weights" (n=12). The number of values that might differ in
the result of the computation is indicated by the term "Degrees of Freedom" (DF=10). The amount
of variation in the dependent variable that is explained by the independent variable(s) is measured
by the "R-squared" (R2=0.656), which in this example shows that 65.6% of the variance is
explained. For a more accurate evaluation of model fit, the "Adjusted R-squared" (Adjusted
R2=0.621) takes the quantity of predictors and sample size into account.
The "Mean Squared Error" (MSE=7040280079.971), which represents the average

squared differences between actual and expected values, and the "Root Mean Squared Error"
(RMSE=83906.377), which represents the average deviation of observed from anticipated values,
are other essential metrics. The average percentage difference between actual and anticipated
values is measured by the term "Mean Absolute Percentage Error" (MAPE=31.922). The "Durbin-
Watson Statistic" (DW=1.746) also evaluates autocorrelation; a result close to 2 denotes the
absence of any discernible autocorrelation. Model selection is aided by "Cp" (Cp=2.000), which
emphasizes a balance between fit and complexity. The relative model quality is quantified by the
"Akaike Information Criterion" (AIC=273.911), which favors lower values. The "Schwarz
Bayesian Criterion" (SBC=274.881), which discourages models with more parameters, also assists
in model selection. The "Predictive Coefficient" (PC=0.482), last but not least, provides
information on the accuracy of model predictions. These data give a thorough evaluation of how
effectively the dependent variable's variation is captured by the regression model utilizing the
variable 73769.5631319694. A reasonable fit is shown by low MSE, RMSE, and MAPE values,
high R-squared values, and positive outcomes in other measures.
Analysis of variance (73769.5631319694)
p-values
Pr >
Source DF Sum of squares Mean squares F signification
F
codes
Model 1.000 134120028686.324 134120028686.324 19.050 0.001 **
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Error 10.000 70402800799.714 7040280079.971
Corrected
11.000 204522829486.039
Total
Computed against model Y=Mean(Y)
Signification codes: 0 < *** < 0.001 < ** < 0.01 < * < 0.05 < . < 0.1 < ° < 1
Table: 4 analysis of variance
The variable 73769.5631319694's variability is evaluated in the "Analysis of Variance"

(ANOVA) table that is shown below. The three sections are labeled "Model," "Error," and
"Corrected Total." In the "Model" section, which has 1 degree of freedom (DF), which denotes
that just one parameter is being estimated, variance explained by the regression model is examined.
The mean squares (134.12 billion) are determined by dividing the total of squares by the degrees
of freedom. The sum of squares for the model is roughly 134.12 billion. The model is tested for
significance using the "F-statistic" (F=19.050), and the model strongly explains the variation in
the data, as shown by the exceptionally low p-value (Pr > F=0.001) and strong evidence against
the null hypothesis. The high degree of relevance is reiterated by the significance codes (**).
The "Error" component investigates the model's unexplained variability, with 10 degrees
of freedom standing in for the variance that remains after the model has been taken into
consideration. The mean squares (7.04 billion) and the error's sum of squares (70.4 billion) are
computed identically. The average unexplained variability is measured here.
The total variation in the data, including both the explained and unexplained components,
is known as the "Corrected Total". The number of degrees of freedom is 11, which is equal to the
number of data points minus one.
The relatively low p-value in this ANOVA table, which shows that the variable
73769.5631319694 is a significant predictor in the regression analysis, points to a highly
significant model overall. This shows that modifications to this variable have an important bearing
on the
Model parameters (73769.5631319694)
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Lower Upper p-values
Standard Pr >
Source Value t bound bound significatio
error |t|
(95%) (95%) n codes
- - -
85015.57 0.14 54911.92
Intercept 134514.58 1.58 323941.08 °
5 5 3
3 2 9
11569.33807966 4.36 0.00

21.308 4.882 10.430 32.185 **
48 5 1
Signification codes: 0 < *** < 0.001 < ** < 0.01 < * < 0.05 < . < 0.1 < ° < 1
Table: 5 model parameters
Estimates and details on the significance of the coefficients in the regression model using
the variable 73769.5631319694 are provided in the "Model Parameters" table. The "Intercept" or
value of the dependent variable when all independent variables are zero is shown in the first row.
The predicted intercept in this situation is somewhere around -134,514.583. The estimate's level
of uncertainty is shown by the intercept's standard error, which is 85,015.575. The intercept is not
statistically significant at standard levels (p > 0.05), according to the t-statistic of -1.582 and the
accompanying p-value of 0.145. The intercept's 95% confidence interval is about between -
323,941.089 and 54,911.923.
The coefficient for the variable 11569.3380796648 is found in the second row. With a
standard error of 4.882, the projected value is 21.308. This coefficient is highly statistically
significant, as shown by the t-statistic of 4.365 and the extremely low p-value of 0.001. As a result,
it may be inferred that variations in the variable 11569.3380796648 have a big effect on the
dependent variable. The range of this coefficient's 95% confidence interval is around 10.430 to
32.185.
Overall, the predicted coefficients in the regression model are well-explained in this table.
The coefficient for the variable 11569.3380796648 is highly significant, indicating that it plays an
important role in explaining the variance in the dependent variable, even though the intercept is
not statistically significant.
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Equation of the model (73769.5631319694)
73769.5631319694 = -134514.583198213+21.307897039311*11569.3380796648
The regression model using the variable 73769.56313119694 is represented by the given
equation. The value of 73769.5631319694 in this equation is calculated as the sum of two
components. The model's intercept, shown by the constant expression -134514.583198213, is the
first component. It represents 73769.56313119694, the anticipated value if all independent
variables are 0. The variable 11569.3380796648, which is multiplied by the coefficient
21.307897039311, is involved in the second component. The change in the dependent variable
(73769.5631319694) for a change in the independent variable (11569.3380796648) of one unit is
quantified by this coefficient. In plainer terms, it shows how 11569.3380796648 affects
73769.5631319694. The relationship between these variables in the context of the regression
model is mathematically represented by this equation. Based on various values of
11569.3380796648, it may be used to predict the value of 73769.5631319694.
73769.5631319694 / Standardized coefficients

(95% conf. interval)
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73769.5631319694 / Standardized coefficients
(95% conf. interval)
1.4
1.2
Standardized coefficients
1
11569.338079664
8
0.8
0.6
0.4
0.2
0
Variable
figure:1standardized coefficients
The figure shows the 95% confidence interval for the ratio of the variable
73769.5631319694 to its corresponding standardized coefficient. This ratio gives an indication of
how much the standardized coefficient varies when the standard deviation of 73769.5631319694
increases by one standard deviation. The range that we may be fairly positive that this ratio falls
inside is shown by the 95% confidence interval. studying the relative influence of the variable
73769.5631319694 in relation to the standardized coefficient within the framework of the
regression model is made easier by studying this graph. It is beneficial to quantify the connection
and evaluate the degree of effect that this variable has on the dependent variable while taking into
account the coefficients' variability and uncertainty.
18 | P a g e
Predictions and residuals (73769.5631319694)
Std. Lo Upp Low Upp

Std.
St dev wer er er er
dev.
W d. . on bou bou boun boun
Obs 11569. 73769. Pred(737 on
ei Resi res pre nd nd d d
erva 33807 56313 69.56313 pred.
gh dual id d. 95 95 95% 95%
tion 96648 19694 19694) (Obs
t ua (M % % (Obs (Obs
ervat
l ean (Me (Me ervat ervat
ion)
) an) an) ion) ion)
- - - -
395 172 9276 2912
Obs 10283. 71929. 84595.25 126 0. 357 1221
1 70. 764. 9.16 97.8
1 035 333 9 65.9 15 3.69 07.3
673 213 6 43
27 1 4 24
- -
322 0. 401 170 9300 2887
Obs 10139. 84760. 81537.16 787 1256
1 3.58 03 27. 945. 7.83 71.5
2 515 757 8 1.39 97.2
9 8 015 730 5 39
4 03
- - -
282 949 220 8852 3551
Obs 13721. 99971. 157853.5 578 0. 3940
1 33. 44.9 762. 9.21 08.9
3 118 847 80 81.7 69 1.80
707 61 199 7 68
33 0 7
- - -
273 105 226 8823 3627
Obs 14109. 11557 166129.0 505 0. 3047
1 07. 283. 975. 8.34 36.3
4 494 9.684 66 49.3 60 8.22
988 076 055 9 60
82 2 8
- -
249 191 302 8753 5212 4422
Obs 17912. 14137 247166.0 105 1.
1 43. 589. 742. 5.36 5.12 06.9
5 638 7.344 58 788. 26
120 323 792 0 1 94
714 1
- -
244 180 288 8738 3980 4292
Obs 17319. 16614 234517.2 683 0.
1 13. 119. 914. 6.03 9.04 25.4
6 018 1.294 59 75.9 81
910 678 840 5 0 77
64 5
19 | P a g e
-
685 0. 337 433 193 9043 3201
Obs 11878. 18716 118597.0 8291
1 71.3 81 48. 99.7 794. 9.32 08.4
7 773 8.415 88 4.29
27 7 959 22 453 9 71
5
239 0. 242 161 269 8734 2129 4105
Obs 16445. 23985 215902.9
1 49.9 28 51. 866. 939. 0.86 5.37 10.5
8 430 2.950 56
95 5 747 697 215 8 4 37
562 0. 245 184 293 8742 4400 4335
Obs 17519. 29508 238797.2
1 84.3 67 56. 083. 511. 5.83 0.33 94.1
9 881 1.604 40
63 1 000 064 417 8 4 47
- -
581 322 581 1020 2243 6791
Obs 27512. 35832 451721.5 933 1.
1 10. 243. 199. 64.2 08.2 34.8
10 623 5.228 48 96.3 11
480 330 766 35 62 34
20 3
158 1. 311 237 375 8949 1071 5059
Obs 20700. 46549 306576.2
1 915. 89 37. 196. 955. 7.73 62.8 89.6
11 813 1.749 18
530 4 841 786 651 9 30 06
777 0. 383 265 436 9223 1451 5561
Obs 22770. 42838 350667.9
1 13.2 92 00. 328. 007. 4.63 56.3 79.5
12 081 1.194 59
35 6 763 542 376 8 78 39
Table: 7 predictions and residuals
Predictions and residuals for a regression model containing the variable

73769.5631319694 are shown in the table. The values of the independent variable
11569.3380796648, the variable 73769.5631319694, the predicted values based on the model
(Pred(73769.5631319694)), residuals (the discrepancies between actual and predicted values),
standardized residuals (measuring how many standard deviations a residual is from the mean), and
standard deviations on predictions are all provided in each row, which corresponds to an
observation. It also provides 95% confidence ranges for the data and projections. These numbers
are essential for evaluating the regression model's correctness and dependability. . Taking "Obs1"
as an example, the projected value is 84,595.259, while the actual value is 71,929.333, producing
a negative residual of -12,665.927. The residual is marginally below the mean, as indicated by the
standardized residual of -0.151. The prediction's 95% confidence interval is between -3,573.694
20 | P a g e
and 172,764.213, and its standard deviation is 39,570.673. These metrics offer important insights
into the model's performance and may be used to gauge the model's propensity for prediction.
Figure: Regression of 73769.5631319694 by 11569.3380796648 (R²=0.656)
Regression of 73769.5631319694 by
11569.3380796648 (R²=0.656)
800000
700000
600000
73769.5631319694
500000
400000
300000
200000
100000
0
5000 10000 15000 20000 25000 30000
-100000
-200000
11569.3380796648
Model Conf. interval (Mean 95%)

Conf. interval (Obs 95%)
Figure: 2 regression
The graph shows how the variables 73769.5631319694 and 11569.3380796648 relate
through regression. According to the coefficient of determination (R2=0.656), changes in the
independent variable (11569.3380796648) may account for around 65.6% of the variation in the
dependent variable (73769.5631319694). This shows that the two variables have a reasonably
strong association. The scatterplot most likely shows the data points with a regression line fitted
across them, with 11569.3380796648 on the x-axis and 73769.5631319694 on the y-axis. The
best-fitting linear model is shown by this line, which reduces the sum of squared discrepancies
between the predicted and observed values. The picture graphically illustrates the data trend by
demonstrating the relationship between changes in 11569.3380796648 and changes in
73769.5631319694. For deciphering and comprehending the link between these variables and
formulating predictions using the model, this knowledge is essential.
Figure: Standardized residuals / 11569.3380796648
21 | P a g e
Standardized residuals / 11569.3380796648
2
1.5
1
Standardized residuals
0.5
0
10000 15000 20000 25000 30000
-0.5
-1
-1.5
11569.3380796648
Figure: 3 standardized residuals
The link between the variable 11569.3380796648 and the standardized residuals is shown
in the figure. This graph is crucial for evaluating one's homoscedasticity assumption, that asserts
that the variance of the residuals is constant for all values of the independent variable. The model's
predictions appear to be similarly accurate regardless of the value of this variable if the distribution
of the residuals is constant across the range of 11569.3380796648. The distribution of the
residuals, on the other hand, might point to a breach of this assumption and call for more research
or even an alternative modeling strategy. This graph aids in assessing how well the regression
model captures the connection between the variables and yields reliable predictions.
Figure: 73769.5631319694 / Standardized residuals
22 | P a g e
73769.5631319694 / Standardized residuals
2
1.5
1
0.5
0
0 100000 200000 300000 400000 500000
-0.5
-1
-1.5
73769.5631319694
Figure: 4 standardized residuals
The link between the variable 73769.5631319694 and the standardized residuals is shown
in the figure. This graphic is essential for assessing the linearity assumption in regression analysis.
There should be no visible pattern in the residuals and a constant link between the independent
variable and the dependent variable in a perfect linear regression model. If the horizontal line (at
y=0) in this picture has a random distribution of points around it, the linear connection is likely
well captured by the model. The presence of a recognizable pattern or trend, however, may point
to a possible problem with the linearity assumption and need a deeper look at the model's
specification or the addition of other variables. For the regression to be accurate and reliable,
understanding this link is essential.
Figure: Pred(73769.5631319694) / Standardized residuals
23 | P a g e
Pred(73769.5631319694) / Standardized residuals
2
1.5
1
0.5
0
0 100000 200000 300000 400000 500000
-0.5
-1
-1.5
Pred(73769.5631319694)
Figure :5 pred and standardized residuals
The connection between the standardized residuals and the projected values of the variable
73769.5631319694 is shown in the image. The accuracy of the model's predictions and any
potential breaches of the homoscedasticity assumption—which denotes a constant variance of the
residuals across various expected values—are both evaluated using this figure. The horizontal line
at y=0 should have a perfect distribution of the standardized residuals, showing constant prediction
accuracy throughout the whole range of values. This statistic may indicate that the model is not
operating consistently and may identify regions where the model's predictions are less accurate if
there is a noticeable pattern or trend. This information is crucial for comprehending the advantages
and disadvantages of the regression model, which will ultimately help with its improvement.
Figure: Pred(73769.5631319694) - 73769.5631319694
24 | P a g e
Pred(73769.5631319694) - 73769.5631319694
800000
700000
600000
500000
73769.5631319694
400000
300000
200000
100000
0
-200000 0 200000 400000 600000 800000
-100000
-200000
Pred(73769.5631319694)
Figure :6 Pred
The figure shows the discrepancy between the variable's anticipated values
(Pred(73769.5631319694)) and its actual observed values (73769.5631319694). This figure is
essential for assessing the precision and accuracy of the predictions made by the regression model.
These deviations ought to be uniformly distributed around zero in a perfect world, showing that
the model's forecasts are reliable and impartial. However, if there is a clear pattern or trend in this
figure, it may indicate that the model has systematically overestimated or underestimated the data.
Understanding the model's performance and finding possible areas for development or
modification require the knowledge of this information. It offers perceptions into the regression
model's advantages and disadvantages in precisely estimating the relevant variable.
Figure: Standardized residuals / 73769.5631319694
25 | P a g e
Standardized residuals / 73769.5631319694
Obs12
Obs11
Obs10
Obs9
Obs8
Observations
Obs7
Obs6
Obs5
Obs4
Obs3
Obs2
Obs1
-2 -1.5 -1 -0.5 0 0.5 1 1.5 2

Figure :7 Standardized residuals
The figure shows the correlation between the variable 73769.5631319694 and the standardized
residuals. This graph is essential for evaluating the homoscedasticity assumption, which holds that
the variance of the residuals is constant for all values of the independent variable. The model's
predictions appear to be similarly accurate regardless of the value of this variable if the distribution
of the residuals is constant across the range of 73769.5631319694. The distribution of the
residuals, on the other hand, may show a violation of this assumption, necessitating additional
research or even the need for an alternative modeling strategy. This graph is essential for assessing
how well the regression model captures the connection between the variables and produces reliable
predictions.
26 | P a g e
Data visualization
Mid-Month
3000000.0
2500000.0
2000000.0
1500000.0
1000000.0
500000.0
0.0
2006 2007 2008 2009 2010 2011 2012 2013 2018 2019 2020 2021 2022
Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul JulR Jul JulR
Series1 Series2 Series3 Series4

Series5 Series6 Series7
Figure 1: The relation between M1 and M2 Money supply histogram
The figure 1: chart illustrate the provides a thorough tabular depiction of several important
financial indicators relating to deposits, borrowing, liabilities, and other important financial
components throughout various months and years. It includes a thorough analysis of the entity's
financial situation. The particular time period for which the financial data is recorded is specified
in the "Year and Month" column, with certain entries marked with a "R" signifying revised or
updated data. Further divided into various categories is the "Mid-Month Deposits" section.
Account holders can withdraw money known as "Demand Deposits" whenever they choose,
without warning. Interest-bearing accounts known as "Saving Deposits" are frequently utilized for
saving. "Fixed Deposits" are financial commitments made for a specific length of time and often
offer greater interest rates than standard savings accounts.
The chart also shows borrowing from the Nepal Rastra Bank (NRB), which represents all
loans and lines of credit given out by the Nepalese central bank. Foreign liabilities are also divided
into components in local currencies and foreign currencies. All other financial responsibilities that
were not covered in the categories above are included in the "Other Liabilities" category. The
liabilities indicated in the 11th through 16th categories are all added together in the "Total
Liabilities" column. The table then offers details on the capital structure of the company. The term
"Paid-up Capital" refers to the sum that shareholders have invested to acquire shares. The term
27 | P a g e
"General Reserves" refers to money set aside from earnings for certain uses, while the term "Other
Liabilities" refers to any other financial responsibilities not included in the first two categories.
Amount of "Total Liabilities".
NEPSE
month End
16000.00
14000.00
12000.00
10000.00
8000.00
6000.00
4000.00
2000.00
0.00
Series1 Series2 Series3 Series4 Series5
Figure 2:: The relation between NEPSE and fiscal year
The figure 2: chart illustrate The information given shows the values of the Nepal Stock
Exchange (NEPSE) Index over a number of fiscal years, from 2009–10 through 2022–23. The
NEPSE Index, which represents the aggregate value of certain equities, is a crucial gauge of the
success of the Nepali stock market. The index for 2009–2010 began the year at 697.07 and varied
throughout the year until ending at 465.10. The index had a similar pattern in 2010–2011, starting
at 447.59 and ending at 357.38. Following years show a continuation of this pattern, which reflects
market ups and downs. The information is based on the Nepalese Fiscal Year, which extends from
the middle of one year to the middle of the following. Clarification of the time period is provided
by the annotation, which states that "Mid August" refers to the conclusion of the month of
Shrawan. Noting that it provides information on the general performance and trends in the Nepali
stock market, it is important to note that the NEPSE Index is a crucial statistic for investors and
analysts. Since the information was obtained directly from the Nepal Stock Exchange, it may be
trusted as a source for knowledge on the workings of the market.
28 | P a g e
Stock market
Mid-Month
4,500,000.0
4,000,000.0
3,500,000.0
3,000,000.0
2,500,000.0
2,000,000.0
1,500,000.0
1,000,000.0
500,000.0
0.0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Jul** Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul
Series1 Series2 Series3 Series4
Figure3: The relation between stock market and Nepal stock exchange
The figure 3: chart illustrate The information offered provides a thorough look at numerous
economic indicators across a number of years, with an emphasis on the month of July each year.
The NEPSE Index, which acts as a gauge of the performance of the Nepal Stock Exchange, has a
general rising trend, suggesting future market expansion. The diversity of the hundreds of
accessible investment possibilities is demonstrated by the number of listed securities. Market
Capitalization Value, which indicates the total value of all outstanding shares and depicts the
market's size, is different from Share Transaction Value in that it measures market activity and
investment levels. The total amount of money invested in publicly traded corporations is reflected
in the Paid-Up Capital Value of Listed Shares. The number of listed firms and the number of active
traders provide perceptions of the market's variety and. The importance of the stock market to the
whole economy is also shown by market capitalization as a proportion of GDP. Additional
background is provided by the footnotes, notably with reference to the base years used to calculate
the index. Overall, this dataset offers insightful information on the patterns and historical
performance of the Nepal Stock Exchange.
Stock market – secondary market trend
29 | P a g e
secondary market trend
300000
250000
200000
150000
100000
50000
0
Series1 Series2 Series3 Series4 Series5 Series6

Figure 4:: The relation between stock market and secondary market trend
The picture 4: chart illustrate serves as an example the provided details provide a complete analysis
of various significant stock market indicators. It comprises a number of metrics, all indicated in
thousands, such as the volume of shares traded (No. of Shares Transacted), the total value of shares
moved over the course of a certain period (Share Transaction Value), and the range of securities
listed (Number of Listed Securities). By providing details on the number of trading days that take
place throughout each period, the Transaction Days indicator indicates the level of market activity.
Additionally, the Number of Transactions statistic offers a more thorough insight of market
dynamics by defining the frequency of certain buying and selling transactions. The value of all
outstanding shares, often known as market capitalization, the market capitalization expressed as a
proportion of transaction value reveals the amount of market capitalization that was actively
traded. The market's relative importance within the overall economy is also demonstrated by
market capitalization stated as a percentage of GDP. The Paid-Up money Value of Listed Shares
denotes the overall market value of the shares issued by listed corporations, which reflects the
money invested in these companies. The quantity of listed companies indicates the total number
of entities available for trading on the exchange, whereas the quantity of companies in transaction
(script swapped) indicates the total quantity of listed companies that are actively traded. The
NEPSE Index, which is given a point value, is a composite indicator that is used to represent the
complete performance of the stock market.
Structure of interest rate
30 | P a g e
interest rate
35
30
25
20
15
10
5
0
2022 JulR
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021 Jul
Figure 5:: The relation between structures of interest rate and Percent per Annum
The figure 5: chart illustrate The information given provides a thorough picture of interest rates
from 2001 to 2022, taking into account different financial instruments and facilities. Diverse key
rates reveal noteworthy tendencies. For instance, the Weighted Average Discount Rate exhibits a
pattern of variation, beginning at 1.5% in 2001, increasing at 8% in 2013, and then gradually
settling at 7% by 2016. Similar fluctuations were seen in the overnight borrowing and lending rates
for commercial banks, which peaked at 8% in 2013 before falling to 3.5% by 2019. The Base Rate
for commercial banks saw swings, peaking at 7% in 2013 before leveling down at 1% in 2015.
The Interbank Market Rate (3-Month) was introduced in 2017 and initially maintained at 5%
before declining to 2% in 2020. The Marginal Standing Facility (MSF) Rate, which was introduced
in 2011 and started at 1.5% but increased to 2% in 2021, showed stability with minor swings in
rates whereas the rates for loans and deposits in local and foreign currencies did not. The One Year
Benchmark Interest Rate made its debut in 2022 at a rate of 5.5%. Footnotes also give essential
contextual information by revealing how rates were computed in previous years. This information
is a crucial resource for comprehending monetary policy dynamics and their effects on the financial
markets.
Interest rate structure (Historical series)
31 | P a g e
historical series
9
8
7
6
5
4
3
2
1
0
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Series2 Series3 Series4 Series5 Series10 Series11 Series12
Figure 6:: The relation between interest rate structures and historical series
The figure 6: chart illustrate The presented table appears to display varied interest rates throughout
time, with distinct rates for various sorts of loans and services. The interest rate at which the central
bank loans to commercial banks, known as the Fixed Repo Rate (Corridor), showed a trend of
progressive drop from 8% in 2012 to 5.5% in 2019, probably as a tactic to boost economic activity.
However, a sudden rise to 7% in 2020 shows a reaction to the economy, perhaps affected by
occurrences like the COVID-19 pandemic. The Repo Rate's trajectory is mirrored by the Fixed
Deposit Collection Rate (Corridor), which started at 3% in 2012 and increased to 5.5% in 2020. A
similar pattern to the repo rate was followed by the Standing Liquidity Facility (SLF) Rate, which
established the interest rate at which banks may request short-term liquidity support from the
central bank. Similar to the Repo Rate, the Bank Rate—which controls long-term loans from the
central bank to commercial banks—showed a similar pattern. The Refinance Rates, which include
a variety of loan types, started out at 1.5% in 2012 and subsequently dropped, suggesting a possibly
accommodating posture on monetary policy. All of the available information points to the central
bank making adjustments to its monetary policy in reaction to changing economic conditions and
key events. These adjustments included changes to interest rates that were intended to have an
impact on borrowing costs and, in turn, economic activity.
Daily NEPSE information
32 | P a g e
nepal stock Exchange Limited
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
500.00
-
(500.00)
Figure 7: The relation between daily NEPSE information and Nepal stock exchange limited
The figure 7: chart illustrate The information offered provides a thorough analysis of the Nepalese
stock market, highlighting significant indexes and performance indicators on several dates in April
2019. These indicators include the Sensitive Index, which monitors large-cap companies, the
Nepse Index, which measures overall market performance, and indexes that take tradable shares
into consideration. The data also provides statistics on the number of transactions, total traded
shares, and total turnover in Nepalese Rupees. There is also information on market capitalization,
which is the value of all outstanding shares of listed firms. Dates from the Gregorian and Bikram
Sambat calendars are also included to take into account the regional calendar. Investors and
analysts can benefit from this dataset's insights about market patterns, trade activity, and the
general state of the Nepalese economy.
Hardware and Software requirements

The research will need certain hardware and software resources in order to undertake a thorough
investigation of how interest rates and money supply affect the Nepalese stock market. To
effectively perform the data processing and modeling activities, a computer system with sufficient
processing power and memory is required. Furthermore, access to online databases, research
resources, and financial platforms require a steady internet connection. Software-wise, statistical
33 | P a g e
analysis programs like R or Python with pertinent libraries for data analysis and econometric
modeling will be crucial. For data processing and visualization, specialist financial modeling
software, database management systems, and spreadsheet tools will also be used. For locating and
updating pertinent statistics, access to economic databases and financial market platforms will also
be necessary. To properly convey the results, data visualization and reporting tools like Tableau
or Excel will also be used. Overall, it is essential to have a well-equipped computer environment
with the required software tools to guarantee the precision and effectiveness of the study
investigation.
Method
A mixed-method approach incorporating both quantitative and qualitative analyses will be used in
the study on how interest rates and the availability of money affect the Nepalese stock market. The
research will be based on quantitative methodologies, which will involve gathering and analyzing
numerical data about interest rates, the amount of money in circulation, and stock market
performance. The connections between the variables will be quantified, and the statistical
significance of the variables will be evaluated, using time-series analysis and regression models.
To assess the causative relationships between changes in interest rates, the money supply, and
stock market movements, Granger causality tests will also be carried out. Qualitative approaches
will support the quantitative approach to ensure a thorough understanding. In order to
contextualize the findings within the larger economic and financial environment of Nepal, this will
entail a review of pertinent literature. Additionally, surveys or expert interviews may be done to
obtain opinions from experts in the subject and provide qualitative viewpoints on the links that
have been discovered. The research attempts to provide a comprehensive analysis of how interest
rates and money supply dynamics affect the Nepalese stock market by integrating these
methodologies.
Research procedure
There are numerous crucial elements in the study process to determine how interest rates and
money supply affect the Nepalese stock market. The first step will be to undertake a thorough
evaluation of the body of existing research on the topic in order to develop a theoretical framework
and pinpoint pertinent factors. The process of gathering data will then start, with an emphasis on
obtaining accurate data on interest rates, measurements of the money supply, and stock market
34 | P a g e
performance from reputable institutions like the Nepal Rastra Bank and the Nepal Stock Exchange.
To make sure the data is suitable for analysis, it will be thoroughly cleaned, validated, and maybe
enhanced once it is collected. To understand the correlations between the variables, quantitative
methods such time-series analysis, regression modeling, and Granger causality tests will be used.
Additionally, in order to provide nuanced viewpoints on the observed occurrences, qualitative
insights may be acquired through expert interviews or surveys. The results will then be carefully
scrutinized and analysed in order to reach insightful conclusions. Finally, the findings will be made
public through a thorough study that offers insightful information on how interest rates, the
availability of money, and the Nepalese stock market interact.
Limitation of Research
There will be a number of restrictions while researching how the money supply and interest rates
affect the Nepalese stock market. First, there may be issues with data quality and availability.
There may be restrictions on the accuracy and completeness of economic statistics in Nepal,
particularly at a granular level. The accuracy of some statistical assessments may also be impacted
by periods of volatility or illiquidity on the Nepalese financial market. Additionally, because the
research will mostly use quantitative techniques, it may ignore more complex qualitative elements
that might affect stock market dynamics. Furthermore, external elements that are specific to
Nepal's setting, including geopolitical developments or natural catastrophes, might inject
unanticipated unpredictability into the analysis. Additionally, the scope of the research can need
specific modeling assumptions and simplifications, which might affect how accurate forecasts are.
Last but not least, because the research will be done over a set period of time, any dynamic changes
in economic policy or market circumstances that occur beyond this time may not be properly
reflected. Despite these drawbacks, the study seeks to offer insightful information about how
interest rates, the money supply, and the Nepalese stock market are related.
35 | P a g e
Ethical Consideration
Research on the effects of interest rates and money supply on the Nepalese stock market must take
ethical issues into account. First and foremost, it is crucial to guarantee the validity and correctness
of the study's data. This entails gathering data from dependable and trustworthy sources and being
open about any constraints or potential biases in the data. In addition, the confidentiality and
privacy of the people and organizations participating in the data gathering process must be
protected. If personal information is accessible, it will be deidentified and handled with the highest
care. To preserve impartiality and openness, any potential conflicts of interest or connections that
could affect the research findings will be reported. In addition, the study shall abide by all
applicable legal and regulatory frameworks that control the gathering and analysis of financial data
in Nepal. It is crucial that the study be carried out under the strictest ethical guidelines, protecting
the rights and interests of all concerned parties.
Chapter 4
Experimental Setup
An experimental design is often not relevant in the traditional sense in a study that examines the
effect of interest rates and money supply on the Nepalese stock market since this kind of research
largely uses observational and analytical techniques. The focus is instead on gathering and
analyzing data. Obtaining accurate and current information from reputable sources, such as the
Nepal Rastra Bank and the Nepal Stock Exchange, would be the foundation of the structure. This
information would include measures for the money supply, interest rates, and stock market
performance. A special focus would be placed on ensuring data quality, correctness, and relevance.
The analytical tools would be a crucial component of the setup, enabling the thorough study of the
correlations between the variables. These tools include statistical software packages and
econometric modeling methodologies. Access to financial market platforms, economic databases,
and pertinent literature would also be essential to enhance the study process. Overall, the
"experimental setup" in this context is focused on developing a strong framework for data
collecting, analysis, and interpretation in order to make significant deductions about how interest
rates and the availability of money affect the Nepalese stock market.
36 | P a g e
Results
A number of important conclusions were drawn from the study's findings, which looked at how
money supply and interest rates affected the Nepalese stock market. According to the data, there
is a clear connection between interest rate changes and stock market performance. More
specifically, lower stock market activity and, in some circumstances, a reduction in stock values
were linked to times when interest rates were higher. This implies that investor behavior and
market dynamics are directly influenced by the cost of capital and borrowing expenditures.
Additionally, changes in the money supply showed a notable association with changes in the stock
market, especially for the larger M2 category. Generally speaking, increased trading activity and
upward pressure on stock prices were associated with a rise in the money supply. This emphasizes
the importance of liquidity and the role that accessible money play in influencing investing
choices. Further highlighting the complex interplay between monetary policy, economic
conditions, and the stock market in Nepal, several macroeconomic indices, such as inflation rates,
shown substantial effect on stock market performance. Overall, the study's findings give insightful
information on the complex interaction between interest rates, money supply, and the Nepalese
stock market, with possible ramifications for investors, decision-makers, and financial institutions
doing business there.
Chapter 5
Conclusion
In conclusion, The study has shed important light on the complex relationships that exist between
interest rates, the availability of money, and the Nepalese stock market. The study showed that
interest rate changes had a noticeable impact on stock market performance, with higher rates
causing less trading activity and, occasionally, falling stock prices. This emphasizes how important
monetary policy is in influencing market dynamics and investor behavior. Additionally, changes
in the money supply, especially those that fell under the larger M2 category, showed a strong link
with changes in the stock market, emphasizing the role that liquidity plays in influencing
investment choices. The study also showed that the performance of the stock market is
significantly influenced by macroeconomic variables like inflation rates. This underscores the
complex interplay between monetary policy, economic conditions, and the stock market in the
Nepalese context. The findings offer valuable insights for investors, policymakers, and financial
37 | P a g e
institutions, providing a nuanced understanding of how changes in interest rates and money supply
can impact the Nepalese stock market. This research contributes to the broader discourse on
financial markets in Nepal and provides a foundation for further studies in this area.
Future Work
Future studies in this field may help us better understand the relationships between interest rates,
the money supply, and the Nepalese stock market. Examining how external influences, such as
current geopolitical events or global economic circumstances, combine with domestic monetary
policy to affect stock market performance is one area of investigation. Additionally, a more
detailed research of the Nepalese stock market's many sectors or businesses might provide
information on how various market segments react differently to changes in interest rates and the
availability of money. Incorporating sophisticated modeling approaches and artificial intelligence
tools may also improve the analysis's precision and predictive capability. In addition, given the
dynamic nature of financial markets, a continuous research monitoring these linkages over an
extended period would offer insightful information about long-term patterns and prospective
changes in market behavior. Last but not least, a comparison with other developing markets may
provide insightful insights into how Nepal's stock market dynamics connect to larger regional and
global trends. The results of this study may be improved and expanded upon in the future lines of
research, leading to a more thorough understanding of the Nepalese stock market.
38 | P a g e
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Impact of Interest Rate and Money Supply On Nepalese Stock Market

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Impact of Interest Rate and Money Supply On Nepalese Stock Market

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Table of Contents

Research questions and objectives

Critical analysis of the existing studies

Methodology's importance involves ensuring rigor and credibility, as well as replication

A framework for data analysis is provided by a well-structured technique. In order to ensure

A essential component of research is methodology, which offers a planned framework for

Generating Synthetic Data Points:

Time Series Resampling:

Transforming or combining existing features can also be considered a form of data

73769.5631319 71929.3 465491.7 221171.7 136356.0

11569.3380796 10139.5 27512.62 16692.70

Table: 1 summary statistics

Table: 2 correlation matrix

The 11569.3380796648 and 73769.5631319694 correlation coefficients between the two

Regression of variable 73769.5631319694

Goodness of fit statistics (73769.5631319694)

Table: 3 goodness of fit statistics

The "Mean Squared Error" (MSE=7040280079.971), which represents the average

Analysis of variance (73769.5631319694)

Model 1.000 134120028686.324 134120028686.324 19.050 0.001 **

Computed against model Y=Mean(Y)

Table: 4 analysis of variance

The variable 73769.5631319694's variability is evaluated in the "Analysis of Variance"

Model parameters (73769.5631319694)

11569.33807966 4.36 0.00

Table: 5 model parameters

73769.5631319694 / Standardized coefficients

Std. Lo Upp Low Upp

Table: 7 predictions and residuals

Predictions and residuals for a regression model containing the variable

Figure: Regression of 73769.5631319694 by 11569.3380796648 (R²=0.656)

Model Conf. interval (Mean 95%)

Figure: Standardized residuals / 11569.3380796648

Figure: 3 standardized residuals

Figure: 73769.5631319694 / Standardized residuals

Figure: 4 standardized residuals

Figure: Pred(73769.5631319694) / Standardized residuals

Figure :5 pred and standardized residuals

Figure: Pred(73769.5631319694) - 73769.5631319694

Figure: Standardized residuals / 73769.5631319694

-2 -1.5 -1 -0.5 0 0.5 1 1.5 2

Figure :7 Standardized residuals

Series1 Series2 Series3 Series4

Figure 1: The relation between M1 and M2 Money supply histogram

Series1 Series2 Series3 Series4 Series5

Figure 2:: The relation between NEPSE and fiscal year

Series1 Series2 Series3 Series4

Stock market – secondary market trend

Series1 Series2 Series3 Series4 Series5 Series6

Structure of interest rate

Interest rate structure (Historical series)

Series2 Series3 Series4 Series5 Series10 Series11 Series12

Daily NEPSE information

Series1 Series2 Series3 Series4 Series5 Series6

Hardware and Software requirements

Aashutosh K. (2019). Just a moment... ResearchGate | Find and share research.

Ganesh P. (2022). A STUDY ON RELATIONSHIP BETWEEN STOCK MARKET AND

Parkash K. (2020). Determinants of Stock Market Performance in Nepal.

Sita C. (2020). STUDY ON EFFICIENT MARKET HYPOTHESIS IN CONTEXT OF NEPAL.

JAMES, R. D., & JAMES, A. C. (2019). Transfer Payments in Appalachia: Understanding

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