Dynamic relationships between stock market performance and short term interest rate Empirical evidence from Sri Lanka
AbstractThis study examines the dynamic relationships between stock market performance and the interest rates in Sri Lanka during June 2004 to April 2011. We use all share price index in the Colombo stock exchange as a measure of stock market performance indicator and Sri Lanka interbank offer rate as a measure of interest rate. We employ some conventional time series econometric techniques namely Unit root test, cointegration test, vector auto correction model (VECM), Granger-Causality test and Impulse response functions (IRF) to trace out the relationships between stock market index and interest rate. The findings of interest include stock market performance is negatively associated with interest rate in the long run while no causal relationship is found in the short run.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 40773.
Date of creation: 18 Aug 2012
Date of revision:
Colombo Stock Exchange; interest rate; cointegration; vector error correction model;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-22 (All new papers)
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