Contents |
Authors:
Md. Mustafizur Rahman, Assistant Professor, Business Administration, European University of Bangladesh (EUB), Bangladesh
Pages: 122-130
DOI: http://doi.org/10.21272/fmir.3(3).122-130.2019
Download: |
Views: |
Downloads: |
|
|
|
Abstract
Macroeconomic indicators, such as money supply, inflation, exchange rate, trade balance, indicators of industrial production, are the basis for assessing the processes of growth and development of the country. Peculiarities of functioning of the exchange market also play an important role in the analysis of the country’s development. Disclosure of the main purpose of the study involves the study of the relationship between macroeconomic indicators and stock prices on the Dhaka stock exchange (DSE) in Bangladesh. Methodological support of the work includes statistical methods (Granger causality test and Dickie fuller test), which allow to determine the causal relationship between macroeconomic indicators and prices on the stock exchange of Bangladesh. Empirical estimates of the study showed the absence of a causal relationship between macroeconomic indicators (money supply, industrial production index, exchange rate, inflation and trade balance) and stock prices in the form of a General index of all shares on the DAX stock exchange. The obtained results indicate that the macroeconomic evaluation cannot be used to predict prices on the stock exchanges in Bangladesh. The study postulates that the results of exchange activity also do not reflect the peculiarities of macroeconomic movement in the country. The author substantiates recommendations for regulatory authorities in terms of the formation of a set of measures to ensure the claim correlation of macroeconomic indicators of the country’s development with prices on the stock market. It is stated that the results of the study will allow the government to take active measures to: overcome in the future the pressure of international trade, adjust the appropriate monitoring and fiscal policy, reduce any possible negative impact on the country’s economy in the context of its further development.
Keywords: macroeconomic variables, money supply, exchange rate, inflation, prices on stock exchanges, Dhaka stock exchange, Bangladesh.
JEL Classification: E44, E5, E6.
Cite as: Rahman, Md. M. (2019). The Relationship between Macro-Economic Variables and Stock Exchange Prices: A Case Study in Dhaka Stock Exchange (DSE) in Bangladesh. Financial Markets, Institutions and Risks, 3(3), 122-130. http://doi.org/10.21272/fmir.3(3).122-130.2019.
References
- Eugenef F. Fama. (1990). Stock Returns, Expected Returns, and Real Activity. The Journal of Finance, 45(4), 1089-1108.
- EF Fama, KR French. (1989). Business conditions and expected returns on stocks and bonds”, Journal of financial economics, 25(1), 23-49.
- NF Chen, R Roll, SA Ross (1986). Economic Forces and the Stock Market, Journal of Business, 59(3), 383-403.
- Y Hamao. (1988). An empirical examination of the arbitrage pricing theory: Using Japanese data, Japan and the World Economy, 1(1), 45-61.
- Chen, Nai-Fu (1991). Financial Investment Opportunities and the Macroeconomic. Journal of Finance, 46, 529-554.
- Thornton J. (1993). Money, output and stock prices in the UK: evidence on some (non)relationships, Journal of applied Financial Economics, 3(4), 335-338. Published online: 04 Jan 2007.
- Kaneko, T., Lee, B.-S. (1995). Relative Importance of Economic Factors in the U.S. and Japanese Stock Markets. Journal of the Japanese and International Economies, 9(3), 290-307.
- Abdalla, I. S.A., Murinde, V. (1997). Exchange rate and stock price interactions in emerging financial markets: evidence on India, Korea, Pakistan and the Philippines. Applied Financial Economics, 7(1), 25-35.
- Cheung, Y.-W., LilianK.Ngb (1998). International evidence on the stock market and aggregate economic activity, Journal of Empirical Finance, 5(3), 281-296.
- AF Darrat, RN Dickens (1999). On the interrelationships among real, monetary, and financial variables. Applied Financial Economics, 9(3),289-293, Published online: 07 Oct 2010, Taylor & Francis.
- R Mookerjee, Q Yu. (1997). Macroeconomic variables and stock prices in a small open economy, The case of Singapore, Pacific-Basin Finance Journal, 5(3), 377-3881997.
- RC Maysami, TS Koh (2000). A vector error correction model of the Singapore stock market. International Review of Economics & Finance, 79-96, Elsevier.
- Kwon CS, Shin TS, Bacon FW (1997). The effects of macro-economic indicators on stock returns in developing Markets. Multi. Bus. Rev. Fall. 5(2), 63-70.
- Kwon CS, Shin TS (1999). Co-integration and causality between macroeconomic indicators and stock exchange prices. Global Fin. J. 10(1), 71-81.
- MS Habibullah, AZ Baharumshah (1996). Money, output and stock prices in Malaysia: an application of the cointegration tests. International Economic Journal, 10(2), Taylor & Francis.
- M. Ibrahim. (1999). Macroeconomic variables and stock prices in Malaysia: An empirical analysis. Asian Economic Journal, 2(13), 219-231.
- R Mookerjee, Q Yu – (1997). Macroeconomic variables and stock prices in a small open economy: The case of Singapore. Pacific-Basin Finance Journal, 5(3), 377-388 – Elsevier.
- Milton Friedman. (1988). Money and the Stock Market. Journal of Political Economy, 96(2), 221-245.
- Boyle Glenn W. (1990). Money Demand and the Stock Market in a General Equilibrium Model with Variable Velocity. Journal of Political Economy, 98(5), Part 1, (Oct., 1990). 1039-1053. 20. NA Ghazali.
- NA Yakob. (1997). Money supply and stock prices: The case of Malaysia. Proceeding Seminar Antar Bangsa.
- Aggarwal, R. (1981). Exchange rates and stock prices: A study of U.S. capital markets under floating exchange rates. Akron Business and Economics Review, 22(2), 7-12.
- Soenen, LA and Hennigar, ES. (1988). An analysis of exchange rates and stock prices-the US experience between 1980 and 1986. Journal of Finance, Akron Business and Economic Review, 36, 15-29, Winter 7-16.
- TK Mukherjee, A Naka. (1995). Dynamic relations between macroeconomic variables and the Japanese stock market: an application of a vector error correction model” Journal of Financial Research, Wiley Online Library.
- B Bhattacharya, J Mukherjee. (2002). The nature of the causal relationship between stock market and macroeconomic aggregates in India: An empirical analysis, 401-426, 4th annual conference on money and finance, Mumbai.
- M Nishat, R Shaheen, ST Hijazi. (2004). Macroeconomic Factors and the Pakistani Equity Market [with Comments], Papers and Proceedings PART II Twentieth Annual General Meeting and Conference of the Pakistan Society of Development Economists Islamabad, 43(4), 619-637, Pakistan Institute of Development Economics, Islamabad.
- Charkravarty S (2005). Stock market and macroeconomic behavior in India, Institute of Economic Growth, Delhi.
- Eugenef F. Fama, G. William Schwert. (1977). Asset returns and inflation, Journal of Financial Economics, 5(2), November 1977, 115-146.
- Nai-Fu Chen, Richard Roll and Stephen A. Ross. (1986). Economic Forces and the Stock Market, The Journal of Business, 59(3), 383-403, The University of Chicago Press.
- Jeffrey F. Jaffe and Gershon Mandelker. (1976). The “Fisher Effect” for Risky Assets: An Empirical Investigation, The Journal of Finance, 31(2), Papers and Proceedings of the Thirty-Fourth Annual Meeting of the American Finance Association Dallas, Texas December 28-30, 1975 (May, 1976), 447-458
- DeFina, R. H. (1991). Does inflation depress the stock market? Business Review, November, 3-12.
- Friedman, M., & Schwartz, A. J. (1963). A Monetary history of the US 1867-1960. Princeton University Press.
- John Kraft and Arthur Kraft. (1977). Determinants of Common Stock Prices: A Time Series Analysis, The Journal of Finance, 32(2), Papers and Proceedings of the Thirty-Fifth Annual Meeting of the American Finance Association, Atlantic City, New Jersey, 417-425 33.
- Nozar H. Taylor P. (2006). Stock prices, money supply, and interest rates: the question of causality, 20(12), 1603-1611.
- Dickey, D. A. (1981). A. and WA Fuller (1979). Distribution of the estimates for autoregressive time.
- Clive W.J. Granger (2000). A bivariate causality between stock prices and exchange rates: evidence from recent Asian flu, The Quarterly Review of Economics and Finance,40(3), 337-354.
- RH Litzenberger, K Ramaswamy. (1982). The Effects of Dividends on Common Stock Prices Tax Effects or Information Effects? The Journal of Finance, Wiley Online Library.
|