Can macroeconomic factors explain equity returns in the long run? The case of Jordan

Hassan, Gazi; refai, Hisham M. Al

doi:10.1080/09603107.2011.637892

Cited by 9 publications

(12 citation statements)

References 48 publications

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“…ence on the finance sector. Hassan and Al Refai (2012) found that the deposit interest had an insignificant impact on the equity returns in Jordan.…”

Section: Autoregressive Distributed Lag (Ardl) Approachmentioning

confidence: 99%

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Dynamic interactions among the industrial sector and its determinants in Jordan

Abuoliem

Nor

Lola

et al. 2019

Investment Management and Financial Innovations

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The industrial sector is one of the most vital sectors in the national economy, so different local and global factors affect its performance. The study examines the impact of the global and local macroeconomic variables on the industrial index of the Amman Stock Exchange. This study covered the period from January 2007 to December 2016, which is considered as a crucial period in the Middle Eastern countries. This period encompasses the worldwide economic meltdown from 2007 to 2008, the Arab spring of 2010 and the wars in Syria and Iraq from 2012 to 2014. The macroeconomic variables used in this study as domestic variables from Jordan were the deposit interest rate (IN), inflation rate (INF), money supply 2 (MS2), trade balance (TR), producer price index (PPI) and the industrial production index (IPI). At the same time the global oil price (WTI) was used as a global factor to measure the external shocks. This study used the ARDL bound testing approach to examine the co-integration, short-run and long-run relationships. Moreover, Granger causality test was used to detect the causality relationship in the short and long run between the selected macroeconomic indicators and the industrial index. It was found out that the inflation rate positively influenced the industrial index, which provides some evidence that the industrial sector in Jordan acts as a hedge against inflation. In addition, the global oil price showed a significant negative impact on the industrial sector. Some important implications for investors, government bodies, and policymakers are discussed.

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“…ence on the finance sector. Hassan and Al Refai (2012) found that the deposit interest had an insignificant impact on the equity returns in Jordan.…”

Section: Autoregressive Distributed Lag (Ardl) Approachmentioning

confidence: 99%

“…Indeed, Jordan is a Middle Eastern country, and the religious disposition of the majority of the population may incline the investors to be not responsive to the changes in the interest rate. Consequently, the stock market is independent of interest rates (Hassan & Al Refai, 2012).…”

Section: Autoregressive Distributed Lag (Ardl) Approachmentioning

confidence: 99%

Dynamic interactions among the industrial sector and its determinants in Jordan

Abuoliem

Nor

Lola

et al. 2019

Investment Management and Financial Innovations

View full text Add to dashboard Cite

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“…However, a possible side e ect can arise: the growth of money supply increases in ationary pressures, which raises borrowing costs and may even reduce asset prices. e e ect of money supply can also be justi ed by the arbitrage pricing theory, formulated by Ross (1976): a whole range of risk factors (including money supply) are responsible for asset returns, so investors who are able to assess the value of the changing money supply can calculate the expected price of each asset, and, if it signi cantly di ers from its market price, earn an arbitrage pro t. Due to these reasons, the majority of the researchers (Hassan & Al, 2012;Vejzagic & Zarafat, 2013;Chowdhury et al, 2013) analyse the causal e ect of money supply on asset prices.…”

Section: Literature Review: the Impact Of Macroeconomic Factors On Asmentioning

confidence: 99%

“…However, when investigating the relationship between macroeconomic variables and assets, these two methods can be inaccurate due to the complexity of multi-equation function and endogeneity issue, so many authors (e.g. Maysami et al, 2004;Hassan & Al, 2012) prefer to employ a simpler vector error correction model -ARDL. is model is also a cointegration method and helps to asses causal relationships, but, unlike other methods, it is a regression model and more advantageous in small sample researches (such as in the case of this study).…”

Section: Data and Construction Of The Modelmentioning

confidence: 99%

The Relationship Between Macroeconomy and Asset Prices: Long Run Causality Evidence From Lithuania

Jurkšas

Paškevičius

2017

OMEE

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The purpose of this paper is to determine the long-run causal impact of various economic factors on Lithuanian stock, government securities and real estate prices, and to assess how accurately future asset returns can be forecasted based solely on economic information. Five macroeconomic indicators, namely, gross domestic product (GDP), foreign direct investment (FDI), consumer price index (CPI), money supply (MS) and Vilnius interbank offered rate (VILIBOR), were included in the model. The results of the created autoregressive distributed lag model (ARDL) revealed that a long-run causal relationship between Lithuanian assets and macroeconomic variables exists and that changing values of these indicators explain about half of the variability of assets’ returns. The results of ARDL model forecast showed that the most precise predictions are obtainable in real estate market, while forecasted returns of stock and government securities are not so accurate, especially the further forecast horizon. The possibility to understand driving factors behind changes of asset prices and to predict future return is of a particular importance not only for investors and businessmen, but also for the policy makers who are responsible for making substantiated decisions regarding monetary, macroprudential and fiscal policies they conduct.

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“…Capital market got importance when it comes to the study of the developing economies; they are the barometer of the developing economy [1]. Factors that affect equity market are of great importance for investors [2]. Stock prices are modeled to be linear function of various macroeconomic variables [3].…”

Section: Introductionmentioning

confidence: 99%