The Bangladeshi stock markets are impulsive for nurture original investment in stock market. Wholly, usual in DSE, there is no theory which we can apply efficiently to prove truthiness. Actually The market which is absolutely not really well-organized in terms of comparative information, and so that is one of the reason government control is no longer affected by these determinants. Due to inefficient market, the study may provide plenty of evidence that determinants of stock price have a little effect on share price. But investors are so many positive to some determinants that are most powerful and positive indicators in regard to profit from share market. However, investors, portfolios managers, and companies in our country are becoming aware of information. As the Bangladesh stock market is an emerging market, further studies need to be conducted to gain a better understanding of the market behavior and assist investors, portfolios managers, and companies to make rational decisions. Research in this area should include market efficiency, reaction to the announcement of events, P/E ratio and stock market returns, and the impact on Bangladesh stock market prices of regional and international stock markets. The result of the study reinforce that many factors have relationships, both positive and negative with share market. The study is not error free for selecting variables but it includes a set of determinants that are important. The study reveal that some qualitative factors namely, company goodwill; market sentiments; company announcements; AGM; unpredicted circumstances; analysts’ report; technical influence; print and electronic media; hype; change in government policy; international situation; political turmoil as well as some quantitative factors like, dividend; market capital; price/salary ratio; EPS; net income; return on investment; retained earnings; merger; stock split; margin loan; demand & supply of stock; inflation; interest rates; exchange rates affect the stock price. This study also finds that price earnings ratio; stock price rumor; demand for the share; changes in government policies; economic circumstances are the most influential internal; external; economical; political; and ecological factors respectively regarding stock price. This paper also reveals liquidity, leverage, profitability, size of the firm, and dividend influence stock price, whereas growth has positive influence on stock price. It is also found that 65.0% of the variation in stock price is explained by cash flows, leverage, profitability, growth, market capitalization, and dividend. WANG Lijuan, XU Ye(2002) Indicate that interest rate and demand of share price they are talking about what factor would be helpful or give a way to witch investment from stock market to Bank mainly I have been get some analysis regarding to this articles well, in this paper, he used statistics from the People’s Republic China’s Statistical association, the People’s Bank of China and China Securities rigid Commission, use Shanghai compound Index (SCI)as the dependent variable, choose macroeconomic indexes that can affect SCI, use SPSS for regression analysis of data and the organization of regression model, examine factors that have an effect on the change of China’s stock prices, and the result show that exchange rates, interest rates, macroeconomic prosperity index, consumer’s self-assurance index and the corporate goods price index are the main factors.
Price is mostly precious by the exchange rate, interest rate, macroeconomic prosperity index, consumer’s confidence index and corporate merchandise price index. Stock price is the result of a lot of factors and it change all the time. apart from for the five main factors, it’s also exaggerated by GDP, economic cycle, equilibrium of international trade payments and others, only that their collision is not as vast as that of the earlier five elements. China’s stock marketplace has just begun and is still a new market. even though in new years it has progressed swiftly, it still has many shortcoming, which requirements study and the making of related strategies to lead it towards a optimistic growth, so as to inspire the development of financial market and China’s economic success. When making applicable strategies, officials require considering the impact of a variety of factors, so that they can make right and effective procedures. Keith Sill (2002) Indicate that interest rate and demand of share price they are talking about what factor would be helpful or give a way to witch investment from stock market to Bank so for the purpose this article define that particularly describe Peso problems can occur when people allocate a helpful probability to actions that might come about but that are not well-represented in historical data. Because asset prices exemplify the financial market’s apparent probability about likely future principles of economic variables, they are particularly receptive to peso problems. Peso problems do not mirror market breakdown or market ineffectiveness. Somewhat, peso problems replicate economic analysts’ difficulty in using history-cal data to correctly model people’s expectations about the future. While the peso problem most usually comes up when analyze foreign-exchange markets, he explained in his explanation that may affect any asset market where opportunity deter-mine prices. The principal result of the peso problem is that it makes it harder to suitably interpret the prediction of economic forecasts and asset-pricing models. Whether peso problems add to asset pricing anomaly is mainly an empirical issue. And as well he has discussed mechanisms by which peso problems can potentially have an effect on asset prices. The principal complexity in studying peso problems is how to model people’s outlook when the economic environment is unstable. Small changes in prospect can often lead to huge changes in people’s behavior and, thus, in the behavior of economic variables such as asset prices. So due to this people will be thing about the transfer their investment automatically from store market to bank Mohd Zaini Abd Karim(2004) The main purpose of this study is to investigate the relevance of stock price and foreign opportunity cost variables to the money demand function in Malaysia using quarterly data over the period of 1982:1 to 1998:2 by employing recently developed econometric techniques of co integration and error correction modeling.
To take into account the effect of Asian Financial Crisis in mid 1997 on the behavior of the demand for money in Malaysia, the sample period is divided into two sub-samples: 1982:1 to 1996:4 and 1982:1 to 1998:2. The results provide evidence that the crisis somewhat affect the behavior of the money demand. The results of the study also show that the real money balances, real income, money’s own rate of return, the rate of return of alternative assets, stock prices, expected exchange rate depreciation and foreign interest rate are cointe -grated suggesting the existence of a stable long run relationship among them in spite of the financial liberalization and innovation process that the Malaysian financial system has been experiencing. In addition, the results also indicate the dominance of wealth effect over substitution effect and the presence of currency substitution in Malaysia. In this paper, we use the robust time series tools in order to estimate Pakistan’s money demand function for the period 1971:1-2006:4.We find that there are four co- integrating vectors in money demand, interest rate, economic activity, inflation, stock prices and exchange rate. Important findings of this paper i.e. stock price have positively and statistically significant wealth effect and exchange rate insigni ficantly effect on money demand in the long run. But in the short run the inflation has negative and significant effect on money demand. The goal of this paper is to estimate the association between exchange rate, stock Prices and demand for money function in Pakistan for the peri od 1971:1 – 2006:4.We estimate the money demand function by using the robust co-integration tools. Th e JJ Co-integration result suggest that there are four co-integrating vectors in money demand, interest rate , economic activity, inflation, stock prices and exchange rate. Important findings of this paper are that stock pr ices positively and statistically significant and exchange rate insignificantly associ ated to money demand in the long run. But in the short run the inflation negatively and significantly effect on the money demand. The stock prices positively wealth on money demand in the long run. Hence an increase in stock prices is expected to dictate an easier monetary policy to prevent a gi ven nominal income or inflation target being undershot.,,,,,,,, Knowing about stimulus of stock indices is a key for the future projection of stocks performance and in turn provide base for making and suggesting appropriate economic policies. The main objective of the study is to find different determinants of share prices and the relationship of these determinants with the share prices of Karachi Stock Exchange (KSE) 100 index of Pakistan. After going through literature review 5 quantitative determinants, namely Book to Market (B/M) ratio, Price Earning (P/E) ratio, Dividend, Gross Domestic Product (GDP) and Interest Rate were selected to find out the direction and strength of relationship. A sample of 34 companies has been randomly selected from 34 sectors of KSE. Ten years’ (2000-2009) data has been collected for the sample companies. The tools used for analysis are Linear Multiple Regression and Correlation Model. It has been concluded that all the factors selected have positive and significant relationship with share prices except Interest rate and B/M ratio. The rise in GDP, dividend and P/E ratio leads to rise in share prices. B/M ratio and interest rate are negatively related to share prices. The hypothesis developed for GDP rate, Dividend per share, Interest rate, B/M ratio and P/E ratio are thus accepted. This paper examines whether stock prices and exchange rates are related to each other or not. Both the long-run and the short-run association between these variables are explored.
The study uses monthly data on four South Asian countries, including Pakistan, India, Bangladesh and Sri-Lanka, for the period January 1994 to December 2000. We employed cointegration, vector error correction modeling technique and standard Granger causality tests to examine the long-run and short-run association between stock prices and exchange rates. The results of this study show no short-run association between the said variables for all four countries. There is no long-run relationship between stock prices and exchange rates for Pakistan and India as well. However, for Bangladesh and Sri Lanka there appear to be a bi-directional causality between these two financial variables. Our results have implications for investors, policy makers and academicians. This paper examined the long-run and short-run association between stock prices and exchange rates for four South Asian countries for the period January 1994 to December 2000. We employed monthly data and applied cointegration, error correction modeling approach and standard Granger causality tests to examine the long run and short-run association. Our results show no long run and short-run association between stock prices and exchange rates for Pakistan and India. No short-run association was also found for Bangladesh and Sri-Lanka. However, there seem to be a bi-directional long-run causality between these variables for Bangladesh and Sri Lanka. Our results suggest that in South Asian countries stock prices and exchange rates are unrelated (at least in the short-run), therefore, investors cannot use information obtained from one market (say stock market) to predict the behavior of other market. Moreover, authorities in these countries cannot use exchange rate as a policy tool to attract foreign portfolio investment; rather they should use some other means to do this (e.g., use interest rates, reduce political uncertainty, improve law and order situation, produce conducive investment climate etc.). The above results provide evidence against the portfolio balance models of exchange rates determination that postulate a uni-directional causation that runs from stock prices to exchange rates, neither do these results support the traditional models that hypothesized causation from exchange rates to stock prices. We, however, suggest that the significance of our results could possibly be improved upon by applying daily or weekly data. The use of more frequent observations may better capture the dynamics of stock and currency market interrelationships.
Another possible extension is to employ the firm level data for these countries and examining the above relationship for those firms that are engaged in international trade (e.g., multinational firms) and for those firms that are not directly affected by exchange rates. The federal funds rate is an indicator of monetary policy that investors in the stock market scrutinize very closely. This paper determines the relationship between changes in the federal funds rate and sector stock indexes. The paper goes on to determine why particular sectors are more sensitive to interest rate changes than others. Weekly returns of the Dow Jones ICB classified financial, energy, utilities, materials, industrials, consumer goods, consumer services, information technology, healthcare and telecommunications sectors are analyzed using separate OLS regression models for each sector. The results show that the utilities, financials, telecom and basic materials sectors are the most interest rate sensitive in that order and that the relationship exhibited between the stock price and the federal funds rate is positive. I conclude by attributing the positive relationship to sector specific demand and supply effects. This paper examines the long- run equilibrium relationships between the major stock indices of Singapore and the United States and selected macroeconomic variables by means of time series data for the period January 1982 to December 2002. The results of various cointegrat ion tests suggest that Singapore’s stock prices generally display a long- run equi librium relationship with interest rate and money supply (M1) but the same type of relationship does not hold for the United States. To capture the short-run dynamics of the evolving relationship between stock indices and macroeconomic variables, we apply the same methodology for different subsets of data covering shorter time periods. It is found that before the Asian Crisis of 1997, stock markets in Singapore moved in tandem with interest rate and money supply, but this pattern was not observed after the crisis. In the United States, stock prices were strongly cointegrated with macroeconomic variables before the 1987 equity crisis but the relationship was impaired thereafter and eventually disappeared with the onset of 1997 Asian Crisis. Finally, the results of Granger causality tests uncover some systematic causal relationships implying that stock market performance might be a good gauge for Central Bank’s monetary policy adjustment. This study investigates the long run and short run relationships between the major stock indices of Singapore and the United States and some macroeconomic variables, like the measure of money supply, M1 and interest rates by means of time series analysis for the period from January 1982 to December 2002. Our cointegration analysis suggest that changes in Singapore’s stock prices in general do form a long run equilibrium relationship with interest rate and M1 but the same does not apply to the case of the United States. We further divide the overall study period into three sub-periods for Singapore and United States data in order to focus on evolving relation between stock price indices and macroeconomic variables on different market conditions. It is found that before 1997 Asian financial crisis, stock markets in Singapore were cointegrated with interest rate and money supply. However this equilibrium was broken after the crisis. In the U.S. markets, stock prices were strongly cointegrated with macro-economic variables before 1987 equity crisis and the equilibrium was impaired after 1987 crisis and ultimately disappeared after 1997 Asian Crisis.
Finally, the results from the Grange r Causality tests seem to support the view that the level of the stock markets might be used by central bank as an indicator to adjust monetary policy. The cointegration and causality findings in our paper enable investors in their investment decision making in the US and Singapore stock markets. Investors could further enhance their investment by incorporating our results with the findings in other approaches, like technical analysis (Wong et al 2001, 2003). Another way to improve the decision making on stock markets is to include the fundamental analysis (Thompson and Wong 1991, Wong and Chan 2004) or to incorporate the stochastic dominance approach (Wong and Li 1999, and Wong et al 2004) or a study on the economic situation or financial anomalies (Manzur, et al 1999, Wan and Wong 2001, and Fong et al 2004). One could also apply advanced time series analysis (Wong and Miller 1990, Tiku et al 2000 and Wong and Bian 2004) or Bayesian estimation (Matsumura et al 1990 and Wong and Bian 2000) to improve the estimation. This paper investigates the existence of spillovers from stock prices onto consumption and the interest rate for South Africa using a time-varying vector autoregressive (TVP-VAR) model with stochastic volatility. In this regard, we estimate a three-variable TVP-VAR model comprising of real consumption growth rate, the nominal three-months Treasury bill rate and the growth rate of real stock prices. We find that the impact of a real stock price shocks on consumption is in general positive, with large and significant effects observed at the one-quarter ahead horizon. However, there is also evidence of significant negative spillovers from the stock market to consumption during the financial crisis, at both short and long-horizons. Monetary policy response to stock price shocks has been persistent, and strong especially post-the financial liberalization in 1985, but became weaker during the financial crisis. Overall, we provide evidence of significant time-varying spillovers on consumption and interest rate from the stock market.
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