The study of return prediction is fundamental to investors. However, inconclusive evidence exists as to whether returns on the South African (SA) stock market may be explained by movements in SA or international macroeconomic variables. This study investigates integration between macroeconomic variables and the JSE ALSI. Using a monthly dataset from 1995-2016, the study is able to update the determination of integration relationships and reduce the 'noise' prevalent in prior research. Unit root, correlation, integration, causality and a vector error correction model were applied. The study identified that the ALSI was statistically significant in explaining SA inflation. The direction and significance of this relationship is of interest to investors and financial economists. If the ALSI has a predictive relationship with inflation, then market performance could impact the decisions made to raise or drop the Repo rate. In addition to the determination of the integration relationships, this study informs researchers on the efficiency and predictability of the SA market.
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