Factors determining the predictability of stock prices in emerging capital markets: Evidence from Colombo stock exchange

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dc.contributor.authorVidanage, T.N.
dc.contributor.authorDayaratne-Banda, O.G.
dc.date.accessioned2024-11-07T07:46:24Z
dc.date.available2024-11-07T07:46:24Z
dc.date.issued2013
dc.description.abstractEmpirical evidence on predictability of stock returns in advanced and emerging capital markets is seemingly mixed. Stock returns in emerging capital markets appear to display weak-form inefficiency. Empirical evidence on the Colombo Stock Exchange (CSE), which is one of the emerging capital markets, has also shown that stock returns tend to display weak- form inefficiency, though factors determining such inefficiency are not well-recognized. This paper, therefore, empirically examines factors determining inefficiency of stock prices focusing on macroeconomic and socio political variables. This study uses time series econometric methods for monthly data from 1985(1) to 2011(5). Results show that there is a long-run relationship between stock returns and macroeconomic variables. Results of Error Correction Model (ECM) and Granger causality tests reveal that there are no such casual links. in the short-run. Socio-political variables all together tend to affect stock price movements. These findings suggest that public information on macroeconomic and socio-political conditions tend to determine stock price movements in the CSE. The empirical results, therefore, indicate that macroeconomic and socio-political variables can, to a considerable extent, be used to predict price movements in emerging capital markets.
dc.identifier.citationModern Sri Lanka Studies, 2013, IV(1), P 21-51
dc.identifier.urihttps://ir.lib.pdn.ac.lk/handle/20.500.14444/3315
dc.language.isoen_US
dc.publisherUniversity of Peradeniya
dc.subjectEfficient market hypothesis
dc.subjectColombo Stock Exchange
dc.subjectCo-integration
dc.subjectError Correction Model
dc.subjectGranger Causality test
dc.titleFactors determining the predictability of stock prices in emerging capital markets: Evidence from Colombo stock exchange
dc.typeArticle
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