Indian Journal of Economics and Development

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Micro-Economic Factors Affecting Stock Returns:An Empirical Study of S & P BSE Bankex Companies


Affiliations
1 PEC University of Technology, Sector 12, Chandigarh, 160012, India
 

Background/Objectives: The equity market has become an essential market playing an important role in economic prosperity, capital formation and sustained economic growth. There can be different micro-economic/fundamental factors. The present study analyses the various fundamental factors that affects the market price of shares which will provide a yardstick and a parameter for long term investors to decide about their investment.

Methods/Statistical analysis: For the purpose of empirical analysis related to the study, index values have been taken to be dependent variable, and other factors (Book Value Per Share, Earning Per Share, Price Earning Ratio, Dividend Yield, Debt to Equity Ratio, Market Capitalisation to Sales, Price/Book Value Ratio, Cash Earning Per Share, Return on Equity and Beta) have been taken as independent variables. Factor Analysis is carried out to identify the critical factors and a detailed analysis of the effect of various factors on stock market. Subsequently regression analysis is undertaken to identify the nature of relationship between index value (dependent variable) and the factors (independent variable).

Findings: Following micro-economic variables were found significantly explain the variance in the S&P BSE Bankex during the period from April 2000 to Mar 2014 : a) Return on Equity b) Debt to Equity. The factors. These micro-economic variables impact the stock prices of S&P BSE Bankex.

Improvements/Applications: The present study can be further carried out for the returns of the other companies listed on the various indexes. Further, other dependent variables can be studied to analyse their impact on the returns of the stock.


Keywords

Micro-Economic Variables, Stock Return, S & P BSE Bankex Index, ROE, EPS, BV, D/E.
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  • M.R. Haque, R.K. Datta, R. Dey, M.M. Rahman. Financial variables having significant impact on market prices of shares. Research Journal of Finance and Accounting. 2013; 4(15), 76-80.

  • M. Joshi. Factors affecting indian stock market.International Journal of Contemporary Research in Management, Engineering and Health Science 2013; 002(001), 37-45.

  • S. Allahawiah, Al Amro. Factors affecting stock prices in Amman stock exchange : a survey study. European Journal of Business and Management. 2012; 4(8), 236-345.

  • P. Srinivasan. Determinants of equity share prices in India : a panel data approach. Romanian Economic Journal. 2012; 15, 205-228.

  • H.A.H. Al-Tamini, A.A. Alwan, A.A. Abdel Rahman. Factors affecting stock prices in the UAE financial Markets. Journal of Transnational Management. 2011; 16(1), 3-19.

  • B.S. Bernanke, K.N. Kuttner. What explains the stock market’s reaction to federal reserve policy? The Journal of Finance. 2005; 60(3), 1221-1257.


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  • Micro-Economic Factors Affecting Stock Returns:An Empirical Study of S & P BSE Bankex Companies

Abstract Views: 240  |  PDF Views: 2262

Authors

Anshika
PEC University of Technology, Sector 12, Chandigarh, 160012, India

Abstract


Background/Objectives: The equity market has become an essential market playing an important role in economic prosperity, capital formation and sustained economic growth. There can be different micro-economic/fundamental factors. The present study analyses the various fundamental factors that affects the market price of shares which will provide a yardstick and a parameter for long term investors to decide about their investment.

Methods/Statistical analysis: For the purpose of empirical analysis related to the study, index values have been taken to be dependent variable, and other factors (Book Value Per Share, Earning Per Share, Price Earning Ratio, Dividend Yield, Debt to Equity Ratio, Market Capitalisation to Sales, Price/Book Value Ratio, Cash Earning Per Share, Return on Equity and Beta) have been taken as independent variables. Factor Analysis is carried out to identify the critical factors and a detailed analysis of the effect of various factors on stock market. Subsequently regression analysis is undertaken to identify the nature of relationship between index value (dependent variable) and the factors (independent variable).

Findings: Following micro-economic variables were found significantly explain the variance in the S&P BSE Bankex during the period from April 2000 to Mar 2014 : a) Return on Equity b) Debt to Equity. The factors. These micro-economic variables impact the stock prices of S&P BSE Bankex.

Improvements/Applications: The present study can be further carried out for the returns of the other companies listed on the various indexes. Further, other dependent variables can be studied to analyse their impact on the returns of the stock.


Keywords


Micro-Economic Variables, Stock Return, S & P BSE Bankex Index, ROE, EPS, BV, D/E.

References