Volume 19, Article 2

Kawser Ahmed Shiblu*
Nowrin Ahmed**

Abstract: This paper investigates the macroeconomic determinants of stock prices of all listed banks in Dhaka Stock Exchange (DSE) by using panel data analysis approach with a data set for 67 months from June 2010 to December 2015. In determining the influential factors, we first tried to see whether the data set is stationary or not at level and after first difference. In the process of stationarity test, we employed panel unit root test e.g. ADF- Fisher Chi Square and this test conclude that almost all variables are non-stationary at level but become stationary after first difference. Later on, we moved to panel cointegration tests (Johensen-Fisher test) and panel cointegration estimates (Dynamic OLS & Fully Modified OLS) to examine the long-run relationship among variables and to find significant determinant variables. The existence of long-run relationship is indicated by significant cointegration test statistics and significant coefficients from panel cointegration estimation indicates positive relationship between money supply & price, change in exchange rate & price, remittance & price but negative relationship between change in lending interest rate & price. Then, the speed of adjustment of short-run disequilibrium towards long-run equilibrium is tested by panel vector error correction model and the result shows a very slow speed of adjustment. These significant determinants leads to the conclusion that banking sector stock price is highly influenced by the Bangladesh Banks’ monetary policy stance.

Keywords: Macroeconomic Determinants, Panel Unit Root Test, Panel Cointegration Test, Dynamic OLS, Fully Modified OLS and Panel Vector Error Correction Model.

* Assistant Professor, Department of Finance, Jagannath University, Dhaka-1100, Bangladesh. Email: kshiblu@gmail.com
** Assistant Director, Head Office, Bangladesh Bank. Dhaka-1000, Bangladesh. Email: nowrin.ahmed@bb.org.bd