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Volatility Nexus Between Stock Market and Macroeconomic Variables in Bangladesh: an Extended GARCH Approach

Volatility Nexus Between Stock Market and Macroeconomic Variables in Bangladesh: an Extended... AbstractThis paper examines the volatility of the Bangladesh stock market returns in response to the volatility of the macroeconomic variables employing monthly data of general index of Dhaka Stock Exchange (DSE) and four macroeconomic variables (Call Money Rate, Crude Oil Price, Exchange Rate and SENSEX of Bombay Stock Exchange) from January 2001 to December 2015. The results of GARCHS models reveal that the volatility of DSE return is significantly guided by the volatility of macroeconomic variables, such as, exchange rate and SENSEX. Specifically, volatility of the DSE is expected to 19% increase by 1% increase of exchange rate. Moreover, the volatility of the Bangladesh stock market returns is expected to dampen down by 2% with an increase in the volatility of Indian stock market of 1%. Thus, we can comment that adding exchange rate or stock returns of India in the GARCH model provides significant knowledge about the behaviour of the DSE volatility. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Scientific Annals of Economics and Business de Gruyter

Volatility Nexus Between Stock Market and Macroeconomic Variables in Bangladesh: an Extended GARCH Approach

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Publisher
de Gruyter
Copyright
© 2017
eISSN
2501-3165
DOI
10.1515/saeb-2017-0015
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper examines the volatility of the Bangladesh stock market returns in response to the volatility of the macroeconomic variables employing monthly data of general index of Dhaka Stock Exchange (DSE) and four macroeconomic variables (Call Money Rate, Crude Oil Price, Exchange Rate and SENSEX of Bombay Stock Exchange) from January 2001 to December 2015. The results of GARCHS models reveal that the volatility of DSE return is significantly guided by the volatility of macroeconomic variables, such as, exchange rate and SENSEX. Specifically, volatility of the DSE is expected to 19% increase by 1% increase of exchange rate. Moreover, the volatility of the Bangladesh stock market returns is expected to dampen down by 2% with an increase in the volatility of Indian stock market of 1%. Thus, we can comment that adding exchange rate or stock returns of India in the GARCH model provides significant knowledge about the behaviour of the DSE volatility.

Journal

Scientific Annals of Economics and Businessde Gruyter

Published: Jun 27, 2017

References