Abstract:
In the present turbulent environmental setting in Sri Lanka, it is paramount
important to investigate the fluctuations in share prices with the changes in
different macro-economic variables. The objective of this research is to
investigate the relationship between macroeconomic variables on sectorial
share price indices in Sri Lanka. Sectorial price indices from six business
sectors were selected as dependent variable. Exchange rate, Treasury bill rate
(Interest rate), Consumer Price Index (Inflation rate) and money supply were
selected as independent variables. Multiply regression analysis was carried out
to investigate the relationship between macroeconomic variables and sectorial
share price indices by using monthly data from 2006 to 2015. Analysis
revealed that macro-economic variables had significant influence for variation
of sectorial share price indices in Sri Lanka. Moreover the study showed that
money supply is most influential factor to determine the sectorial share price
indices for all selected sectors. Exchange rate and Interest rate were showed
significant negative impact on share prices for all selected sectors. The study
gives meaningful insight to prevailing literature and it gives practical
implication for investors, stock market regulators and policy makers and
makes foundation for future research to study the macroeconomic variables on
different sectors separately.
