Macroeconomic Factors of Emerging Stock Market: The Evidence from Thailand

Abstract

This paper aims to examine the importance of macroeconomic factors to determine the performance of stock market. The regression analysis is used to examine this relationship. The result shows that macroeconomic variables can explain stock return significantly after adjusting for some lags of data availability. Moreover, the lead-lag relationship is examined by Vector Autoregression model and Granger causality test. They reveal that macroeconomic variables are less important to predict future stock return whereas stock return can be used to predict macroeconomic variables more. In the other word, stock return is good candidate as a leading economic indicator. Finally, the variance decomposition technique reveals that interest rate is the most important macroeconomic variable to explain the variance in stock return. However, it is clearly noticed that all macroeconomic variables can explain only a little variance in stock return.

The Review of Macroeconomic Factors and Stock Returns

“…Many studies have shown that macroeconomic variables can be used to explain future stock returns (Asai & Shiba, 1995;Hondroyiannis & Papapetrou, 2001). However, some studies have shown the reverse of this relationship, as stock returns can be use to predict future macroeconomic variables (Tangjitprom, 2012). One example of this relationship is from the study of Henry, Olekalns, and Thong (2004), who have employed a non-linear model to show evidence from 27 countries that stock returns are useful in predicting output growth.…”

“…Hondroyiannis and Papapetrou (2001) have also documented a similar direction of the relationships for the stock market in Greece. However, Tangjitprom (2012) found the opposite result, as stock returns Granger-cause most macroeconomic variables in Thailand.…”

Capital Market Determinants and Market Capitalization in Nigeria

“…The examinations explored above are done in various economies, which comprise of both rising and created economies, thus the outcomes fluctuate. Nopphon (2012) was an out and out deviation from the bearing of different examinations while a few different investigations utilized macroeconomic factors regular in the nations they assessed. This examination is completed in Nigeria and the most widely recognized economic indicators among others chosen for this investigation are the swapping scale, loan cost, swelling rate and total national output.…”

Evaluation of the Impact of Macroeconomic Variables on Stock Market Performance in Nigeria

“…The studies reviewed above were carried out in different economies, which consisted of both emerging and developed economies, and so the results varied. Nopphon (2012) was an outright deviation from the direction of other studies while several other studies made use of macroeconomic variables common in the countries they reviewed. This study is carried out in Nigeria and the most common macroeconomic factors among others selected for this study are the exchange rate, interest rate, inflation rate and gross domestic product.…”

“…Therefore, the findings differ depending on the economic environment studied, macroeconomic factors used and the time periods covered. Nopphon (2012) study was a total contradiction and deviation from the general belief that macroeconomic variables affect stock market performance. Using Thailand as a case study, the study covered a period from 2001 to 2010 and found that stock return was a better economic indicator that could predict the behavior of macroeconomic variables.…”