The Role of Macroeconomic Variables on Stock Market Index in China and India

Hosseini, Seyed Mehdi; Ahmad, Zamri; Lai, Yew Wah

doi:10.5539/ijef.v3n6p233

Cited by 91 publications

(88 citation statements)

References 39 publications

(24 reference statements)

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“…The results found that macroeconomic variables significantly influence stock market indices. However, the VEC equilibrium time-series model applied by others (Adeleke and Gbadebo, 2012;Agrawalla and Tuteja, 2008;Chaudhuri and Smiles, 2004;Filis, 2010;Herve et al, 2011;Hess, 2004;Hosseini et al, 2011;Karacaer and Kapusuzoglu, 2010;Kyereboah and Agyire, 2008;Maysami and Koh, 2000;Muradoglu et al, 2001;Nasseh and Strauss, 2000;Patra and Poshakwale, 2006;Wong et al, 2006) to explore the long-run and short-run equilibrium relationships between macroeconomic variables and stock market indices. These studies revealed that macroeconomic variables significantly change stock market indices.…”

Section: Review Of Previous Empirical Studiesmentioning

confidence: 99%

Investigating Equilibrium Relationship between Macroeconomic Variables and Malaysian Stock Market Index through Bounds Tests Approach

Bekhet¹,

Mugableh²

2012

IJEF

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The current paper conducts an empirical examination into the long-run and short-run equilibrium relationships between macroeconomic variables and the Malaysian stock market index (SMI) for the 1977-2011 period. Specifically, it employs Ng and Perron (NP) bounds statistics test to detect the boundaries of variables stationarity. Subsequently, the co-integrating relationships among variables are tested using the bounds F-statistic test. Eventually, the long-run and short-run equilibrium relationships are analyzed using Pesaran, Shin, and Smith (PSS) bounds tests Approach. The results indicate that all macroeconomic variables are co-integrated with SMI. Besides, understanding the long-run and short-run equilibrium relationships between macroeconomic variables and SMI could be highly appreciable from the perspectives of policymakers, financial economists, domestic and international investors dealing with Malaysian stock market.

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Section: Review Of Previous Empirical Studiesmentioning

confidence: 99%

Investigating Equilibrium Relationship between Macroeconomic Variables and Malaysian Stock Market Index through Bounds Tests Approach

Bekhet¹,

Mugableh²

2012

IJEF

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“…In addition the variables in goods market are not appropriate indicators to forecast the future stock index movement. Hosseini et al (2011) study the role of four macroeconomic variables which are the crude oil price, money supply, industrial production and inflation rate on stock market index in China and India employing Johanse-Juselius multivariate cointegration and Vector eroor correction model technique. The study found a short run and long run linkage between macroeconomics variable and stock market index in both countries.…”

Section: Introductionmentioning

confidence: 99%

Relationship of Stock Price and Monetary Variables of Asian Small Open Emerging Economy: Evidence from Thailand

Boonyanam¹

2014

International Journal of Financial Research

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Monetary variables contain information to forecast stock price is still controversial. This paper examines the relationship between stock price and monetary variables in Thailand which is an Asian small open emerging economy. Monetary variables are consumer price index, nominal bilateral exchange rate in term of bath per US dollar, narrow money, and 14 days repurchased rate, employing a multivariate cointegration, VECM, variance decomposition and impulse response analysis covering the period of January 1999 to December 2012 with 168 observations. The study found a long run relationship between monetary variables and stock price. There is no short run adjustment toward the long run equilibrium but narrow money and interest rate have significant short run effect on stock price. The bidirectional causality between stock price and inflation and between stock price and narrow money are found. A unidirectional causality is found from exchange rate to stock price and from interest rate to stock price. Variance decomposition indicates that narrow money and the interest rate contribute the highest in stock price while the variance in stock price give the highest contribution to exchange rate, narrow money and inflation respectively. The impulse response analysis indicates that the stock price responses intensively to narrow money and interest rate. The monetary variables response to the shock in stock price intensively after 2 months and all responses appear to divert away along the horizon which confirms the VECM result that there is no short-run adjustment towards the long run equilibrium. The relationship facilitates investor and policy maker in making effective investment decision as well as the efficient policy designation.

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“…Stock returns are found to be significantly influenced by exchange rates, inflation rates and the S&P 500 Index while returns are not influenced by interest rate, gross domestic product, money supply and oil prices. Hosseini et al (2011) studied the relationships between stock market indices and four macroeconomics variables including crude oil price, money supply, industrial production and inflation rate in China and India for the period January 1999 to January 2009. Results suggest both long and short run linkages between macroeconomic variables and the stock market index in both countries.…”

Section: Literature Reviewmentioning

confidence: 99%

Evidence of Macroeconomic Policy Effects over Company-Sector Stock Returns

Madaleno

Pinho

2014

RES

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Abstract:Given that stock markets may act as an economy mirror, it is explored the sensitivity of company-sector-specific stock returns to macroeconomic news reflecting different economic environments for the UK, US, Germany, Japan and Australian markets between March 1993 and February 2013 using monthly data. Results seem to indicate that portfolio investors need to be aware that movements in the market index is the best predictor to forecast stock returns of individual companies and sectors in developed economies. Sentiment influences individual company's returns of the utilities sector, even if these are considered of limited growth and stable earnings, for UK, USA and Australia, turning investor confidence a relevant variable to be included. Information increases about industrial production have no influence on company and sector stocks, thus not affecting investor's decision in developed countries. As for Japan, results seem to indicate that the higher the need of oil imports of a country, the higher will be the positive impact of oil price changes over company returns. Finally, the riskless interest rate has no effect on sector stock returns independently of the country under analysis. For developed economies, we confirm the finding that stocks cannot be used as a hedge against inflation. Keywords: Factor Models, Macroeconomic Variables, Stock Returns, Firm Performance, Growth Determinants Resumo: Dado que os mercados de ações podem funcionar como um espelho da economia, explora-se a sensibilidade dos retornos de ações de empresas-setores específicos aos impactos de notícias macroeconómicas refletindo diferentes ambientes económicos para os mercados do UK, EUA, Alemanha, Japão e Austrália entre Março de 1993 e Fevereiro de 2013 usando dados mensais. Os resultados obtidos sugerem que os investidores precisam de estar atentos aos movimentos do índice de mercado pois este parece ser o melhor indicador previsional dos retornos de ações tanto de empresas individuais como de setores em países desenvolvidos. O sentimento influencia os retornos das empresas individuais no sector das "utilities", mesmo sendo estes considerados de crescimento limitado e ganhos estáveis para o UK, EUA e Austrália, evidenciando a relevância de incluir a variável confiança do consumidor. Novidades relacionadas com a produção industrial parecem não ter qualquer influência nos retornos de empresas e de setores, e assim não afetam as decisões dos investidores nos países desenvolvidos. Relativamente ao Japão, os resultados parecem indiciar que quanto maior for a necessidade de importações de petróleo de um país, superior será o impacto positivo de alterações do preço do petróleo sobre os retornos das empresas. Finalamente, a taxa de juro sem risco não mostra evidência de impacto nos retornos por sector independentemente do país em análise. Para as economias desenvolvidas, conseguimos confirmar resultados prévios de que as ações não conseguem cumprir a função de cobertura de risco face à inflação.

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The Role of Macroeconomic Variables on Stock Market Index in China and India

Cited by 91 publications

References 39 publications

Investigating Equilibrium Relationship between Macroeconomic Variables and Malaysian Stock Market Index through Bounds Tests Approach

Investigating Equilibrium Relationship between Macroeconomic Variables and Malaysian Stock Market Index through Bounds Tests Approach

Relationship of Stock Price and Monetary Variables of Asian Small Open Emerging Economy: Evidence from Thailand

Evidence of Macroeconomic Policy Effects over Company-Sector Stock Returns

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