Abstract:
The stock market is playing a vital role in fostering the prosperity and economy
of a country. Smooth functioning of a stock market will enable a country
economically stabilized. The stock market has been functioning as one of the
most vital components of a free-market economy, as it helps to arrange capital
for the companies from shareholders. The stock market performance is measured
by all share price index. The share price index is being affected by various factors
but recently, inflation has become a dominant factor in destabilizing Sri Lankan
economy. The sampling period of this study was from 1985 to 2016. The impact
of inflation on share price index has been analysed in this research study. The
inflation was considered as independent variable and All Share Price Index (ASPI)
was considered as dependent variable. Hypotheses were tested using correlation
and regression analyses. The research findings indicated that inflation significantly
impacts on share price index. This paper investigates the relationship between
inflation and share price index in Sri Lanka using time series data from 1985 to
2016 by employing correlation and regression analyses. Smooth functioning of a
stock market will reduce stock market volatility which could potentially stabilize
the economy and make it more efficient and prosperous. It has been widely observed
by various researchers that there is relationship between inflation and all share
price index, in Sri Lanka. The inflation is the independent variable and All Share
Price Index (ASPI) is the dependent variable. The research findings indicated that
the inflation significantly impacts on share price index in Sri Lanka.
