Abstract:
Economists and technical analysts state that fundamental economic variables should explain the stock price behavior. Stock prices should reflect current and expected future real economics activities. Symmetric assumptions by efficient market hypothesis verify that all information relevant influence of the country must be captured by its stock prices. This based on the notion that stock prices quickly and fully reflect all available information. To be absolutely correct, this is referring to informational efficient market. More over in an open economy, the stock prices shouldn’t only react to the domestic economic activities but also to the relevant foreign economic activities.
In this research we argue that the efficiency of the Sudanese stock market in respect of domestic macroeconomic variables. Accordingly we attempt to capture the foreign influences upon Khartoum stock price by Exchange Rate and the openness behavior. Also by usage of international portfolio investment approach we explain the ability of exchange rate to control for broad foreign factors .The existence of such two explanatory variables avoid the bias result by explaining the Khartoum stock price fluctuations in relation to domestic fundamental alone. We employ Co- integration, and linear regression to test our argument.
We find that on usage of integration test under phillip Perron technique exhibit stationary on all variables on the level except exchange rate and consumer price Index. No results obtained under Co-integration test cause of short length of our research period. Finally results of regression estimation techniques exhibit efficient linear relationship between the regressand and its explanatory variables only on usage of the real macroeconomic variables.
