Predicting the All Share Price Index (ASPI) of Colombo Stock Exchange on Macro Economic Variables and Exogenous Factors DPPN

Abstract

—This study mainly focuses on developing a statistical model to predict ASPI with a reasonable accuracy and identifying the relationships between ASPI and other important socio-economic variables, such as macroeconomic variables, elections and war. The key results of this study include that the absence of the war has a positive relationship with ASPI compared to the presence of the war and the presence of severe bomb blasts in Colombo. The presence of presidential and general elections and the crude oil price have a positive relationship with ASPI. Furthermore, presence of the provincial elections, Imports, exports and exchange rates have a negative relationship with ASPI. Moreover, it was found that during the post war period the conditional heteroscedasticity was absent in ASPI. In addition to that the model which was chosen to predict the ASPI has a Mean Absolute Percentage error (MAPE) of 4.05% on the test set