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An Empirical Study of the Relationship between Macroeconomic Variables and Stock Price: A Study on Dhaka Stock Exchange (DSE)

Author

Listed:
  • Md. Mohiuddin

    (IBA, University of Dhaka, Bangladesh)

  • Md. Didarul Alam

    (Independent University, Bangladesh)

  • Abdullah Ibneyy Shahid

    (IBA, University of Dhaka, Bangladesh)

Abstract

Literature strongly supports vibration of the stock price as a consequence of various macroeconomic factors (Darrat, 1990; Fama & Schwert, 1977; Jaffe & Mandelker, 1976; Nelson, 1976; Pearce & Roley, 1985; Ripley, 1973). This study has investigated the explanatory power of various macro-factors such as inflation rate, exchange rate, interest rate, money supply and production index on the variability of the stock price in Bangladesh. Multiple regression analysis has been conducted to asses the relationship between the stated macro economic factors with stock price. All share price index of the Dhaka Stock Exchange has been used as a proxy for stock price, the dependent variable of the study. No significant relationship has been found between the stock price and any of the macroeconomic factors. The study bodes well for advanced empirical models with additional macroeconomic variables.

Suggested Citation

  • Md. Mohiuddin & Md. Didarul Alam & Abdullah Ibneyy Shahid, 2008. "An Empirical Study of the Relationship between Macroeconomic Variables and Stock Price: A Study on Dhaka Stock Exchange (DSE)," AIUB Bus Econ Working Paper Series AIUB-BUS-ECON-2008-21, American International University-Bangladesh (AIUB), Office of Research and Publications (ORP), revised Jun 2008.
    • Handle: RePEc:aiu:abewps:21
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    References listed on IDEAS

    as
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    2. Nelson, Charles R, 1976. "Inflation and Rates of Return on Common Stocks," Journal of Finance, American Finance Association, vol. 31(2), pages 471-483, May.
    3. Martin Feldstein, 1983. "Inflation, Tax Rules, and the Stock Market," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 199-220, National Bureau of Economic Research, Inc.
    4. Pearce, Douglas K & Roley, V Vance, 1985. "Stock Prices and Economic News," The Journal of Business, University of Chicago Press, vol. 58(1), pages 49-67, January.
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