Sensitiveness of stock market returns to macroeconomic determinants; an empirical study on the pharmaceutical industry of Dhaka Stock Exchange

Abstract

The thesis empirically investigates selected macroeconomic determinants’ (money supply, exchange rate, industrial production, interest rate, and inflation rate) influence on the stock market returns of the Dhaka Stock Exchange's Pharmaceutical Industry, utilizing monthly data spanning the period from 2015:1 to 2020:12. Ten pharmaceutical companies were selected for this thesis to represent the pharmaceutical industry of the Dhaka Stock Exchange. Scatterplots, correlation analyses and linear regression analyses were conducted to examine the associations. The statistical analyses conducted in this thesis revealed that the effects of the macroeconomic determinants on stock returns were insignificant. The stock markets in Bangladesh are being subject to the control of affluent and politically influential individuals, artificial pricing mechanisms through the establishment of floor prices and market inefficiencies led to the thesis’s inconclusive results. The thesis's inability to incorporate data spanning more than six years also had a role in contributing to its inconclusive results. Despite certain limitations, this thesis provides solid evidence on the current state of the Dhaka Stock Exchange.