Research Repository

Macroeconomic Forces and Stock Prices: Some Empirical Evidence from an Emerging Stock Market

Wickremasinghe, Guneratne B (2006) Macroeconomic Forces and Stock Prices: Some Empirical Evidence from an Emerging Stock Market. Working Paper. School of Accounting & Finance, University of Wollongong, Wollongong, New South Wales.

Full text for this resource is not available from the Research Repository.

Abstract

This paper examines the causal relationships among stock prices and macroeconomic variables in an emerging stock market, the Colombo Stock Exchange (CSE). We use data on six macroeconomic variables and All share Price Index (ASPI) of the CSE for the period January 1985 to December 2004. In the empirical analysis, we employed recently developed root tests that possess better power and size properties than widely-used Dickey-Fuller type unit root tests. Johansen's test, Error-correction models, variance decomposition and impulse response analyses indicate that there are both short and long-run causal relationships among stock prices and macroeconomic variables in Sri Lanka. These results indicate that stock prices can be predicted from certain macroeconomic variables and hence violate the validity of the semi-strong version of the efficient market hypothesis. The above results have implications for investors, both domestic and international.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: ResPubID11635 Colombo Stock Exchange, CSE, Ng-Perron tests, cointegration, variance decomposition, Granger causalty
Subjects: Faculty/School/Research Centre/Department > School of Accounting
FOR Classification > 1503 Business and Management
Depositing User: Ms Lyn Wade
Date Deposited: 10 Dec 2013 01:11
Last Modified: 10 Dec 2013 01:11
URI: http://vuir.vu.edu.au/id/eprint/22515
DOI: Working Paper 14, 2006
ePrint Statistics: View download statistics for this item

Repository staff only

View Item View Item

Search Google Scholar