Oil Prices Influence on Stock Market in Srilanka

Abstract

This study examined the relationship between oil prices, interest rate, exchange rate and other macroeconomic variables and stock market in Srilanka. Monthly data of oil prices, interest rate, and total oil consumption of the country, exchange rate and stock market indices are modeled into a linear regression model. The secondary data of this research for diesel prices obtained from Petroleum cooperation in Srilanka, data of oil consumption obtained from the ministry of energy, the data of exchange rate and the interest rates obtained from the central bank of Srilanaka. Pearson correlation and regression were used to test the relationship between that both diesel prices and interest rates have significance relationship with stock market in SriIanka. However, when the relationship is positive to the diesel prices, the relationship of the interest rates is negative. The finding also indicated that total oil consumption and the exchange rates are positive relationship with the stock market operation in Srilanka, that finding also indicated that a very strong relationship between diesel prices and exchange rate.