Equity Market Performances: Evidence from South East, South West, Central and North East Asia Regions

Abstract

This work takes a comprehensive look at the macroeconomics and equity market performances from the Asia perspective, using five indicators namely inflation rate (CPI), interest rate (IR), money supply (MS), exchange rate (ER), economic growth (GDP), against six equity market indexes of FBM KLCI (Malaysia), IDX (Indonesia), SENSEX (India), BIST-100 (Turkey), SSE (China), and Nikkei-225 (Japan) based on the framework of the Arbitrage Pricing Theory (APT). The annual data from 1988:2021 are sourced from World Bank, FRED of Federal Reserve Bank, and Central Bank Official website for selected countries. The analysis technique employed is Pooled Ordinary Least Square (POLS). The study established that all four variables which are CPI, IR, ER, and GDP are strongly significant with the actual direction in affecting the performances of six Asia stock exchanges. Our results confirm the economic theories and empirics that there are strong relationships between macroeconomic indicators and equity market performances in six Asia regions. The current study reveals new insights where a modified version of APT Model multifactor is correctly specified when more than one variable is dominant, which suggests that all four independent variables are crucial in explaining the variation of the equity market performances in South East, South West, Central and North East Asia regions.