Waidyarathna, C. M.Rajeshwaran, N.2025-09-222021Waidyarathna, C. M., & Rajeshwaran, N. (2021). Responses of Share Returns to Macroeconomic Information: An Empirical Examination of Bank, Finance and Insurance industry in Sri Lanka. International Journal of Accountancy, 1(1), 48-65.http://repository.kln.ac.lk/handle/123456789/29994The purpose of this study is to examine the impact of macroeconomic variables on Share Returns of Banking, Financing, and Insurance (BFI) companies listed at the Colombo Stock Exchange (CSE). The Theory of Efficiency Market Hypothesis (EMH) is applied to investigate the research. The study used secondary data of companies listed under Banking, Finance and Insurance sector in CSE from 2010 to 2017. Macroeconomic variables include Exchange rate, Interest rate, Inflation rate and Broad Money Supply (M2). The macroeconomic data were collected from the Central Bank of Sri Lanka. Descriptive Statistics, Augmented Dickey-Fuller, unit root test, Johansen co-integration and vector error correction model were also used in analyzing the study. The co-integration test results depict the positive relation between the Total Return Indices in BFI sector with the interest rate and money supply. In contrast, the Exchange rate and inflation rate negatively affects the correlate with Total Return Index in the BFI sector. This study also emphasizes that there is no significant short-run causality from macroeconomic factors to Total Return Index (TRI). It is concluded that there is a minimum level of positive impact with interest rate and money supply in the long-run causality, while a negative effect with the exchange rate and inflation rate. The study supports the EMH, which states that it is immediately reflected in share return when new information comes into the market.Macroeconomic VariablesTotal Return IndicesJohanson Co-integrationColombo Stock ExchangeBankingFinanceand Insurance sectorArticle