The stock market is one of the most energetic sectors that play an important role in\ncontributing to the wealth of the economy. It plays a crucial role in the economic growth and\ndevelopment of an economy which would benefit industries, trade and commerce as a whole.\nThe aim of this study is to investigate the impact of macroeconomic variables on stock\nmarket returns in Sri Lanka. Dependent variable of this study is stock market return measured\nby All Share Price Index (ASPI) and All Share Total Return Index (ASTRI) and independent\nvariables are macroeconomic variables, such as Interest Rate (IR), Inflation Rate (INF),\nExchange Rate (ER), Factory Industry Production Index (FIPI) and money supply (MS).\nThe study targets all the companies listed and active in Colombo Stock Exchange (CSE) from\n2006 to 2015. For analysis, secondary data was collected from annual reports of Central bank\nof Sri Lanka, Colombo Stock Exchange, Securities and Exchange Commission and\nDepartment of Census and Statistics. The results of the study reveal that the stock market\nreturns is influenced by macroeconomic variables except money supply in Sri Lanka. Interest\nrate and factory industry production have negative influence on stock market return in\nColombo Stock exchange while inflation rate and exchange rate have positive influence on\nstock market return. The findings of the study may be useful to public and economy\nespecially stock market investors to focus the macroeconomic variables for making their\neffective decisions in order to enhance their stock market returns.
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