Socio-economy and stock market volatility

Md Sharif Hossain, Md.Thasinul Abedin

Abstract


We evaluate how stock market return volatility behaves with respect to socioeconomic factors namely- interest rate volatility, foreign exchange rate volatility, S &P 500 index volatility, broad money supply volatility, per capita GDP, domestic investment, industry value addition, tertiary level of education, urbanization, and strike and blockades using time series data from 1976-2015. We find that interest rate volatility has significant positive impact on stock market return volatility where broad money supply volatility, foreign exchange rate volatility, tertiary level of education, and domestic investment have significant negative impact on stock market volatility based on stepwise regression. Therefore, increase in tertiary level of education and domestic investment makes the stock market more stable. From the estimated result of VAR model, results show no short run causality among these variables.


Keywords


Domestic Investment; Foreign Exchange Rate Volatility; Strike and Blockades; S & P 500 Index Volatility; VAR Model.

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DOI: http://dx.doi.org/10.18533/jefs.v5i04.292

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