An Investigation of Statistical Behaviors of the Stock Market Fluctuations in the Colombo Stock Market: ARMA & PCA Approach
R. M. Kapila Tharanga Rathnayaka *
School of Economics, Wuhan University of Technology, P.R. China and Department of Statistics, School of Sciences, Wuhan University of Technology, P.R. China and Department of Physical Sciences and Technology, Faculty of Applied Sciences, Sabaragamuwa University of Sri Lanka, Belihuloya,70140, Sri Lanka.
D. M. K. N. Seneviratna
School of Economics, Wuhan University of Technology, P.R. China and Department of Statistics, School of Sciences, Wuhan University of Technology, P.R. China and Department of Interdisciplinary Studies, Faculty of Engineering, University of Ruhuna, Sri Lanka.
Zhong-jun Wang
Department of Statistics, School of Sciences, Wuhan University of Technology, P.R. China.
*Author to whom correspondence should be addressed.
Abstract
Throughout the world, Equity markets have been advanced as the main forms of investment for numerous organizations and individuals arraying large investments and funds to the general public. The nature of the stock market becomes highly volatile. The demeanor of aggregate stock prices and trade volume behaviors play a significant role in stock market fluctuations. The main goal of this study is to investigate the directions and movements of market prices and trade volume rates in Colombo Stock Exchange (CSE) during 2007 to 2012. The results reveal that both micro and macro-economic factors directly impact on market volatility. The unit root test results found that, all the sectors in the CSE are highly stationary under the 0.05 level of significance. Moreover, results forecast suggest that Bank Finance and Insurance, Beverage Food and Tobacco, and Investment Trust sectors are most suitable sectors for investing capitals over a period of several months in the future.
Keywords: CSE, ARMA model, PCA approach