The Relationship between Interest Rate Fluctuations and the Amman Stock Exchange and Real Estate: An Analytical Study

Abstract

This paper aims to identify the relationship between interest rate fluctuations, the Jordanian markets of stocks, and real estate in terms of trading volume, the price index of the stock market in general, and the shares of the Jordanian real estate companies listed in Amman Stock Exchange as the Jordanian representative of the real estate market. The study was conducted on the period of 2000-2008, given the substantial fluctuations in the interest rate that those years witnessed. Through the use of Pearsons Correlation Coefficient, the study concluded the following: First, there is a positive and strong relationship between interest rate fluctuations and the price index of Amman Stock Exchange. Second, the relationship between interest rate fluctuations and the price index of construction companies is positive with a weak relationship. Third, there is a weak relationship between interest rate fluctuations and the trading volume in the two markets; Finally, Amman Stock Exchange is more sensitive than real estate market to fluctuations of interest rate.