Proceedings of The 6th International Conference on New Ideas in Management, Economics and Accounting
An Association between Stock Index And Macro Economic Variables in Bangladesh
Shamil M. Al-Islam and Zaima Ahmed
The aim of this article is to explore whether certain macroeconomic variables such as industrial index, inflation, broad money, exchange rate and deposit rate as a proxy for interest rate are interlinked with Dhaka stock price index (DSEX index) precisely after the introduction of new index by Dhaka Stock Exchange (DSE) since January 2013. The data set considered consists of monthly observations, for a period of four years from January 2013 to June 2018. Findings from cointegration analysis suggests that DSEX and macroeconomic variables have a significant long run relationship.
VAR decomposition based on VAR estimated indicates that money supply explains a significant portion of variation of stock index whereas, inflation is found to have the least impact. Impact of industrial index is found to have low impact compared to exchange rate and deposit rate. Policies should there aim to increase the industrial production in order to enhance stock market performance. Further reasonable money supply should be ensured to by authorities to stimulate stock market performance
KeyWords: stock price index.