Share Price Volatility and Macroeconomic Factors

By

Abstract

There is an effective relationship between share price volatility and macroeconomic factors of the countries. This relationship has been checked in the stock market of Nepal by analyzing the share price value of different banks operating in the country and the macroeconomic factors. The macroeconomic conditions are the important indicator of the country's economic performance. The stability and rising trend in the macroeconomic indicators shows that the country has stable economic conditions and earning large revenues from all the sectors. The major macroeconomic indicators of the economy are mainly inflation, interest rate, exchange rates, Foreign Direct Investment etc. The performance of these indicators shows stability in the economic conditions of the country. The stability in these macroeconomic indicators leads to the economic stability of the country. Inflation is the change in prices of commodities overtime. The rise in inflation leads to the economic disparity and reduction in the value of currency. Thus, the inflation should be well controlled in the country in order to experience stable value of currency and effective prices. The research study has analysed the data for past six years that is from 2005 - 2010. The inflation rate in these years shows up and down trend in case of Nepal. The interest is also an effective indicator of the economic growth in the country. The interest rate in Nepal has shown comparatively stable rate in the past five years which indicates that the banks are offering loans at relatively stable rates as compare to the banks of other countries. The third indicator that has been used in the research study is the exchange rate. The exchange rate shows the value of domestic currency in terms of other international currencies. The exchange rate of Nepal has remained very high in terms of dollars. The higher return of local currency in terms of international currency shows that the country is experiencing low currency value. Nepal is going through the same situation and experiencing low currency value.

Similarly, the stability in the economic conditions of the country also shows rising trend in its GDP. The rising GDP trend shows that country is generating higher revenues and people have higher standard of living with other benefits offered by the government authorities. The

The aim of performing this research is to analyse the factors that affect the macroeconomic conditions of the countries. The macroeconomic factors are important determinant of the country's economic conditions. The aim of the research study is to analyse the impact of stock markets on the macroeconomic conditions in case of Nepal. To evaluate the economic conditions of Nepal, the changes in the stock market has been analysed by checking the macroeconomic variables of the country. The stock markets are considered to be the barometer of the countries and shows clear picture of future health of the economy. The primary objective of the research study is to analyse the performance of Nepalese stock markets by taking into account past records of different Nepalese ...