IJSRP, Volume 5, Issue 1, January 2015 Edition [ISSN 2250-3153]
Stock market development has a paramount importance in an economy. Although most of the growing economies are endowed with growing stock markets, due to prevailed unfavorable econo-political condition in Sri Lanka, Colombo Stock Exchange (CSE) remained underdeveloped during the pre-war period. However, due to considerable economic growth and peaceful political environment, CSE reported a robust growth in the post-war period. Nevertheless, despite the impressive economic environment emerged, the stock market growth was not sustained after 2012. Therefore, the constraints for stock market development remain unclear. Thus, this study examined the impact of macroeconomic factors on stock market development in Sri Lanka using descriptive statistics and multiple regression analysis over the monthly data between 2002 and 2014. Stock market turnover was used as the proxy of stock market development whereas inflation volatility, deposit interest rate, lending interest rate, exchange rate volatility and gross domestic production were used as the key macroeconomic factors.