Share Trading & Economic Growth in Sri Lanka

Abstract

Most of the capital market researchers in various countries revealed that there is a linkage exists between share trading operations and the economic growth. This study, tests the impact between share trading operations and economic growth in Sri Lankan context employing multiple regression models using twenty years data from 1995 to 2014.The main purpose of this research is to identify the relationship between share trading operations and Sri Lankan economic growth. The study measures the share trading in terms of the Growth of all share price index (ASPI Growth), Market Capitalization Growth (MC Growth) and Market Turnover Growth as independent variables where as the economic growth measures in terms of Gross Domestic Product (GDP) as depending variable. Further two control variables (Inflation Rate (IR) and Exchange Rate (ER)) were used to arrive at a reasonable finding regarding the association between share trading operations and the economic growth.. The empirical findings of the study confirmed that there is a positive relationship between share trading operations and economic growth in Sri Lankan context with 57%. This result confirms that 57%t of the variation of the GDP will be explained through selected independent variable and control variables over the above particular period.