Commerce and Management

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    Impact of Macroeconomic Variables on Sectorial Share Price Indices in Sri Lanka
    (Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Senarathna, K.A.H.K.; Rathnasiri, U.A.H.A.
    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.
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    The Relationship between Short-term Interest Rate and Stock Market Performance: Evidence from Sri Lanka
    (Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Weerakoon W.P.P.K.; Jameel A.L.M.
    The issue on the relationship between stock market performance and the interest rate has been discussed by economist and researchers since both play important roles in influencing one nation’s economic development. The aim of this paper is to examine the relationship between short-term interest rate and stock market performance for Sri Lankan stock market using the data from July 2005 to June 2015. We used three-month Treasury bill rate as the proxy for the short-term interest rate and All Share Price Index (ASPI) as the proxy for the stock market performance. In addition to the short-term interest rate, the regression model consists of other three important macroeconomic variables such as money supply, consumer price index and exchange rate in order to extract the effect of monetary policy, country’s price level and foreign exchange rate on the stock market performance. The Multiple regression results in displays that the relationship between short-term interest rate and stock market performance exist as significantly negative. Further, the study found that the exchange rate and inflation rate have negative and money supply has a positive relationship with ASPI. The findings of the study hold practical implications for policy makers, stock market regulators, investors, and stock market analysts.
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    A Multivariate Cointegration Analysis of Inflation in Sri Lanka
    (2011) Kesavarajah, M.
    This study attempts to analyze the experience of inflation in Sri Lanka for the period 1978 to 2010 using the econometric framework of Johanson and Juselius cointegration approach, vector error correction model(VECM) and Granger causality analysis. The Annual time series data drawn from various annual reports of Central Bank of Sri Lanka were used in this study. The empirical results of the study indicate the existence of long run dynamic relationships among the variables. Vector error correction model shows that money supply growth, budget deficit, and exchange rate depreciation have significant positive effects on inflation. Evidence from Granger causality analysis suggests the existence of unidirectional causality from money supply to inflation, exchange rate to inflation and budget deficit to inflation is significant, while the causal relationship from inflation to money supply, exchange rate and budget deficit is insignificant. Hence, the results of this study emphasize the need to put in place a stable macroeconomic policy environment relating to these variables in an effort to maintain price stability, since low inflation would enhance economic growth.