Stock prices and macroeconomic variables nexus in South Asian countries

Abstract

The paper examines the interactions between stock prices, exchange rate, interest rate, inflation and income in Bangladesh, India, Pakistan and Sri Lanka using monthly data for the period 1997:07 to 2013:06. The motivation is to establish the causal and cointegrating relationship between stock prices and macroeconomic variables. The results indicate that cointegration holds between these variables in all countries. Temporal causality results are mixed, from unidirectional causality to bi-directional and even no causality between stock prices and macroeconomic variables. Causality results generally support the 'portfolio approach' that stock prices lead changes in exchange rate. However, the results of impulse response analysis, based on the structural VAR model, support the 'traditional approach' and suggest that it is exchange rate innovations that affect stock prices. Variance decomposition analysis also supports the findings of impulse response analysis.

Dividend payment policy across food industry companies – the case of European economies

“…The firm's profitability signals the ability of firms to pay a dividend and increase investors' motivation to purchase more shares [Bhattacharyya 2007;Ho 2003;Zakaria, Junyang 2016]. Furthermore, the increase in dividend level is a signal of a positive trend in future company profitability [Grullon, Michaely, Swaminathan 2012].…”