Macroeconomic and Firm-Specific Determinants of Stock Price Volatility Before and After COVID-19: Evidence from the Pharmaceutical and Chemical Sectors of DSE
DOI:
https://doi.org/10.64102/rujssbs.0478Keywords:
Dhaka Stock Exchange (DSE), Macroeconomic Factors, Firm Specific Factors, Panel Data Analysis, Random Effects ModelAbstract
Due to its function of facilitating capital formation, allocation of resources, and investment decisions, the stock market plays a crucial role in economic development. Investors, policymakers, and financial practitioners all require some knowledge of the determinants influencing stock price volatility. This study aims to analyze the macroeconomic and firm-level variables affecting stock price volatility of companies in the Bangladeshi pharmaceutical and chemical sector during the pre- and post-COVID-19 periods, covering 2016-2019 and 2021-2024. The study uses data from 19 out of the 34 listed pharmaceutical and chemical companies on the DSE. The study utilizes panel data analysis and random effects model (as per the Hausman test), considering annualized stock price volatility as the dependent variable, whereas independent variables are return on equity (ROE), directors’ holdings (DH) percentage, debt-to-equity (D/E) ratio, inflation rate, and GDP growth rate. Diagnostic and statistical tests confirm the robustness of the findings. The results reveal significant variations in volatility drivers across the two periods, with remarkable influences from macroeconomic instability and financial disruptions. The findings of the study have significant implications for policy-makers and investment decision-makers by identifying period-specific volatility drivers that aid in the formulation of adaptive policies, improve stability in the market, and inform sound investment decisions.
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