Introduction: Macroeconomic variables such as Inflation, GDP, Foreign Currency Reserve, and Currency Exchange Rates etc are

the indicators of assessing the stock return for the welfare of general investors to dig out the profitable security investment to contribute in the economic development of Bangladesh through exploring different lucrative securities in different sectors from the stock market in the form of investment and lending. A case analysis for securities return from the Dhaka Stock Exchange, while the changing impacts from macroeconomic variables are working on, is very rational and time preferred, for that reason a hefty data based study has been undertaken to find out the actual impact of macroeconomic variables on stock return.

MACROECONOMICS Variables:
Macroeconomics considers the performance of the economy as a whole. Many macroeconomic issues appear in the press and on the evening news on a daily basis. When we study macroeconomics we are looking at topics such as economic growth; inflation; changes in employment and unemployment, our trade performance with other countries (i.e. the balance of payments) the relative success or failure of government economic policies and the decisions made by the Bank of England. Economic Growth - trends in national output and living standards Unemployment - the causes and consequences of unemployment and the reasons for the changing structure of the work force Inflation - the economics of price inflation - who loses and who gains and what can we do about inflation? International trade - does the UK pay its way in trading with other countries? Interest rates - should interest rates rise or fall? How do changes in interest rates affect consumers and businesses in the economy The variables that is pertinent to a broad economy at the regional or national level and affects a large population rather than a few select individuals. Macroeconomic factors such as economic output, unemployment, inflation, savings and investment are key indicators of economic performance and are closely monitored by governments, businesses and consumers. Major macroeconomic variables are inflation rate, unemployment rate, direct foreign investment, the exchange rate, foreign reserve etc.

Correlation:

The correlation is a way to measure how associated or related two variables are. The researcher looks at things that already exist and determines if and in what way those things are related to each other. The purpose of doing correlations is to allow us to make a prediction about one variable based on what we know about another variable. For example, there is a correlation between income and education. We find that people with higher income have more years of education. (You can also phrase it that people with more years of education have higher income.) When we know there is a correlation between two variables, we can make a prediction. If we know a groups income, we can predict their years of education. In a positive correlation, as the values of one of the variables increase, the values of the second variable also increase. Likewise, as the value of one of the variables decreases, the value of the other variable also decreases. The example above of income and education is a positive correlation. In a negative correlation, as the values of one of the variables increase, the values of the second variable decrease. Likewise, as the value of one of the variables decreases, the value of the other variable increases. This is still a correlation. It is like an inverse correlation. The word negative is a label that shows the direction of the correlation.

The stock market in Bangladesh, more specifically the Dhaka Stock Exchange (DSE), has seen a meteoric rise over the last few years. In fact, the DSE General Index has risen by more than 125% from March 2009 to February 2010. The following figure provides a comparison of the DSE Index with some major regional and international markets.

Calculation of macro economics factor on DSE general index by Correlation analysis:

Calculation of Coefficient of correlatin between GDP and dse general index: X=GDP Y=DSE General Index Year X Y 2007 5458224 2528.48 2008 6147952 2895.34 2009 6943243 4335.53 2010 7967040 8090.41 Sum 26516459 17849.76 X*Y 1.38E+10 1.78E+10 3.01E+10 6.45E+10 1.26E+11 X^2 Y^2 2.98E+13 6393211 3.78E+13 8382994 4.82E+13 18796820 1 2 3 6.35E+13 65454734 7.83E+09 3.49E+12 19374276 1.79E+14 99027759

X" Y" Coefficient of correlation,r= Coefficient of determinationr^2= 0.952364 0.906997

6629115 4462.44

Comment:Strong positive correlation.It implies that if GDP increase then DSE general index increase and if GDP decrease then DSE general index decrease.GDP has 90% influence on DSE general index.

Calculation of Coefficient of correlatin between exchange rate and dse general index: X=exchange rate Y=DSE General Index Year 2007 2008 2009 2010 Sum X 69.893 68.554 68.9 Y X *Y X^2 Y^2 2528.48 176723.1 4885.031 6393211 2895.34 198487.1 4699.651 8382994 4335.53 298718 4747.21 18796820

69.17 8090.41 559613.7 4784.489 65454734 276.517 17849.76 1233542 19116.38 99027759

1 2 3 398.654 0.968443 19374276

X" Y" 0.09203 0.00847

69.12925 4462.44

Coefficient of correlation,r= Coefficient of determinationr^2=

Comment: Strong negative correlation. It implies that if exchange rate increase DSE general index decrease or vice versa Exchange rate has nearly .8% influence on DSE general index.

Calculation of Coefficient of correlatin between inflation rate and dse general index: X=inflation rate Y=DSE General Index

Year 2007 2008 2009 2010 Sum

X 8.34 8.9 5.42

Y X*Y 2528.48 21087.52 2895.34 25768.53 4335.53 23498.57

X ^2 Y^2 69.5556 6393211 79.21 8382994 29.3764 18796820

8.13 8090.41 65775.03 66.0969 65454734 30.79 17849.76 136129.7 244.2389 99027759

1 2 3 1268.87 7.232875 19374276

X" Y" Coefficient of correlation,r= Coefficient of determinationr^2= -0.10719 0.011489

7.6975 4462.44

Comment: Weak correlation. It implies that if inflation rate increase DSE general index decrease or vice versa Exchange rate has nearly .1% influence on DSE general index.

Calculation of Coefficient of correlatin between Money Supply and DSE general Index: X=money supply Y=DSE General Index

Year 2007 2008 2009 2010 Sum

X Y 186492 2528.48 227139 2895.34 2722886 4335.53 3279910 8090.41 6416427 17849.76

X*Y 4.72E+08 6.58E+08 1.18E+10 2.65E+10 3.95E+10

X^2 Y^2 3.48E+10 6393211 5.16E+10 8382994 7.41E+12 18796820 1 2 3 1.08E+13 65454734 1.08E+10 7.97E+12 19374276 1.83E+13 99027759

X" Y" Coefficient of correlation,r= Coefficient of determinationr^2= 0.872359 0.761009

1604107 4462.44

Comment: Strong positive correlation. It implies that if money suply increase then DSE general index increase and if money supply decrease then DSE general index decrease. Money supply has 76% influences on DSE general index.

Conclusion:
Over the last few years, the capital market of Bangladesh has witnessed a haughty growth which is not in line of development in the real sector of the economy. Our multivariate correlation analysis result showed that inflation rate and exchange rate are negatively related with stock prices on the other hand GDP and money supply positively correlated with DSE general index.