Stock returns, macroeconomic variables and expectations: Evidence from Brazil

Abstract

There is not general support to explain the correlation among the macroeconomic variables and share returns in different countries and time. The unique characteristics of the Brazilian economy have changed deeply over the last years, thus the purpose of this study is to explore the correlation among the macroeconomic variables and share returns in Brazil from 2000 to 2010. The study investigates the causality relationships among real stock returns, basic interest rates, GDP, inflation and the market expectation of future behavior of these macroeconomic variables. The method used to find the correlation among the variables studied was the Stepwise Multiple Regression. The results show that basic interest rates and GDP affect the stock returns, however inflation and market expectation of future behavior of these macroeconomic variables affect stock returns insignificantly.

The Relationship between Money Supply, Exchange Rates and Oil Prices with KLCI's Price

“…Coefficient correlation showed a positive relationship between the two variables. This result is consistent with Linck and Decourt's (2016); Chia and Lim's (2015) results.…”

“…A widely established index-calculating technique boosted transparency and made the index more tradeable. Linck and Decourt (2016) assert that stock competition is highly susceptible to various factors, including economic index. By pooling funds from many investors, the stock market gives capital to publicly traded corporations.…”

“…Investors should be cautious of currency fluctuations affecting equities market results. Linck and Decourt (2016); Chia and Lim (2015); Kibria et al (2014) feel that there is a positive correlation between the exchange rate and the stock market. Exchange rates are detrimental to the stock market; Ouma and Muriu (2014) found that the coefficients for the association between two stock price indexes and the exchange rate were significantly negative.…”

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“…Investor uses company's financial information in shaping expectation of future profits from the capital invested in the company (Linck and Decourt, 2016). It is due to the reason that for an investor, the significant aspect they have to consider when evaluating an investment is how much potential that will be paid in the future compared to the risks that investor will get.…”