Abstract
This study investigates semi-strong form of the Efficient Market Hypothesis
(EMH) based on macroeconomic variable version of the Arbitrage
Pricing Theory (APT) using monthly data of All Share Price Index (DSI) of
Dhaka Stock Exchange (DSE) and five macroeconomic variables namely,
Industrial Production Index (IPI), Broad Money Supply (M2), Crude Oil
Price (OP), Exchange Rate (ER) and Index of Bombay Stock Exchange
(SENSEX) from January 2001 to December 2012. The Johansen and
Juselius multivariate cointegration tests reveal that IPI and OP have
significant negative long run relationship with DSI, while M2, ER and
SENSEX have significant positive long run relationship with DSI. The results
of VECM indicate that there is long run causality running from the
explanatory variables to DSI. The study also reveals that individually IPI
and SENSEX are the leading indicators with respect to stock prices in
Bangladesh in the short run. Moreover, stock price index of DSE is a leading
indicator with respect to IPI and ER in the short run. Therefore, Bangladeshi
stock market is motivated by macroeconomic factors, while global stock
markets have some influence on it. Hence, it may be concluded that DSE is
not efficient in the semi-strong form of EMH.
