The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries

The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries

The purpose of the study is to explore the relationship between macroeconomic factors (Interest rate, Exchange rate, Inflation, GDP and Money supply) and the emerging stock market through the evidence of selected 13 emerging stock markets over the past 20 years period from 1997 to 2016. The yearly d...

Full description

Saved in:
Bibliographic Details
Main Author: Hu, Sizhe
Format: Thesis
Language:eng
eng
Published: 2018
Subjects:
HG Finance
Online Access:https://etd.uum.edu.my/7679/1/s821617_01.pdf
https://etd.uum.edu.my/7679/2/s821617_02.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
id my-uum-etd.7679
record_format uketd_dc
institution Universiti Utara Malaysia
collection UUM ETD
language eng
eng
advisor Nordin, Sabariah
topic HG Finance
spellingShingle HG Finance
Hu, Sizhe
The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries
description The purpose of the study is to explore the relationship between macroeconomic factors (Interest rate, Exchange rate, Inflation, GDP and Money supply) and the emerging stock market through the evidence of selected 13 emerging stock markets over the past 20 years period from 1997 to 2016. The yearly data is collected from Thomson Data Stream. Through a series of regression analysis and diagnostic tests, the fixed effect model with robust standard error is found to be the most appropriate. The findings show that interest rate, exchange rate and money supply have significant relationship with the emerging stock markets. The increase of interest rate will inversely affect the change of stock market indices. The exchange rate and money supply move in the same direction with the emerging stock market indices. Meanwhile, consumer price index (CPI) and GDP have no significant relationship with the emerging stock market indices.
format Thesis
qualification_name masters
qualification_level Master's degree
author Hu, Sizhe
author_facet Hu, Sizhe
author_sort Hu, Sizhe
title The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries
title_short The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries
title_full The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries
title_fullStr The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries
title_full_unstemmed The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries
title_sort impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries
granting_institution Universiti Utara Malaysia
granting_department School of Economics, Finance & Banking
publishDate 2018
url https://etd.uum.edu.my/7679/1/s821617_01.pdf
https://etd.uum.edu.my/7679/2/s821617_02.pdf
_version_ 1747828253455810560
spelling my-uum-etd.76792021-08-09T07:46:42Z The impact of macroeconomic factors on the emerging stock markets performance: evidence from selected countries 2018 Hu, Sizhe Nordin, Sabariah School of Economics, Finance & Banking School of Economics, Finance & Banking HG Finance The purpose of the study is to explore the relationship between macroeconomic factors (Interest rate, Exchange rate, Inflation, GDP and Money supply) and the emerging stock market through the evidence of selected 13 emerging stock markets over the past 20 years period from 1997 to 2016. The yearly data is collected from Thomson Data Stream. Through a series of regression analysis and diagnostic tests, the fixed effect model with robust standard error is found to be the most appropriate. The findings show that interest rate, exchange rate and money supply have significant relationship with the emerging stock markets. The increase of interest rate will inversely affect the change of stock market indices. The exchange rate and money supply move in the same direction with the emerging stock market indices. Meanwhile, consumer price index (CPI) and GDP have no significant relationship with the emerging stock market indices. 2018 Thesis https://etd.uum.edu.my/7679/ https://etd.uum.edu.my/7679/1/s821617_01.pdf text eng public https://etd.uum.edu.my/7679/2/s821617_02.pdf text eng public masters masters Universiti Utara Malaysia Abdullah, N. A. H., Ma'aji, M. M., & Khaw, K. L. H. (2016). The value of governance variables in predicting financial distress among small and medium-sized enterprises in Malaysia. Asian academy of management journal of Accounting and Finance, 12(1), 77-91. Alam, M.M., & Uddin, G. S. (2009). Relationship between Interest Rate and Stock Price: Empirical evidence from Developed and Developing Countries. International Journal of Business and Management, 4(3), 43-51. Albaity, M. (2011). Impact of the monetary policy instruments on Islamic stock market index return. Economics Discussion, 26, 508-538. Atje, R., & Jovanovic, B. (1993). Stock markets and development. European Economic Review, 37(2), 632-640. Bai D., Sun F. F., & Yu X. (2013). Analysis of Macro Influencing Factors of Stock Price Fluctuations. Economist, (1), 69-70. Balduzzi, P. (1995). Stock returns, inflation, and the ‘proxy hypothesis’: A new look at the data. Economics Letters, 48(1), 47-53. Barakat, M. R., Elgazzar, S. H., & Hanafy, K. M. (2016). Impact of macroeconomic variables on stock markets: Evidence from emerging markets. International Journal of Economics and Finance, 8(1), 195-207. Basistha, A., & Kurov, A. (2008). Macroeconomic cycles and the stock market’s reaction to monetary policy. Journal of Banking & Finance, 32(12), 2606-2616. Bernanke, B. S., & Kuttner, K. N. (2005). What explains the stock market's reaction to Federal Reserve policy?. The Journal of finance, 60(3), 1221-1257. Bhargava, A., Jamison, D. T., Lau, L. J., & Murray, C. J. (2001). Modeling the effects of health on economic growth. Journal of health economics, 20(3), 423-440. Bilson, C. M., Brailsford, T. J., & Hooper, V. J. (2001). Selecting macroeconomic variables as explanatory factors of emerging stock market returns. Pacific-Basin Finance Journal, 9(4), 401-426. Bjørnland, H. C., & Leitemo, K. (2009). Identifying the interdependence between US monetary policy and the stock market. Journal of Monetary Economics, 56(2), 275-282. Bodie, Z. (1976). Common stocks as a hedge against inflation. The journal of finance, 31(2), 459-470. Brandt, M. W., & Wang, K. Q. (2003). Time-varying risk aversion and unexpected inflation. Journal of Monetary Economics, 50(7), 1457-1498. Brunie, C. H., Hamburger, M. J., & Kochin, L. A. (1972). Money and stock prices: the channels of influence. The journal of Finance, 27(2), 231-249. Brunie, C. H., Hamburger, M. J., & Kochin, L. A. (1972). Money and stock prices: the channels of influence. The journal of Finance, 27(2), 231-249. Büyüksalvarci, A., & Abdioglu, H. (2010). The causal relationship between stock prices and macroeconomic variables: A case study for Turkey. International Journal of Economic Perspectives, 4(4), 601-601. Campbell, J. Y. (1990). A variance decomposition for stock returns. National Bureau of Economic Research, 1991(101), 57-179 Chatziantoniou, I., Duffy, D., & Filis, G. (2013). Stock market response to monetary and fiscal policy shocks: Multi-country evidence. Economic Modelling, 30(5), 754-769. Chen, N. F., Roll, R., & Ross, S. A. (1986). Economic forces and the stock market. Journal of business, 59(3), 383-403. D’Amico, S., & Farka, M. (2003). The Fed and the stock market: A proxy and instrumental variable identification. Royal Economic Society Annual Conference, No.52. Manuscript, Columbia University. DeFina, R. H. (1991). Does inflation depress the stock market?. Business Review, Federal Reserve Bank of Philadelphia, 11(3), 3-12. Dritsaki, M. (2005). Linkage between stock market and macroeconomic fundamentals: case study of Athens stock exchange. Journal of Financial Management & Analysis, 18(1), 38-47. Drury, C. (2008), Management & Cost Accounting, 7th ed., Cengage Learning, London. Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The journal of Finance, 25(2), 383-417. Fama, E. F., & Schwert, G. W. (1977). Asset returns and inflation. Journal of financial economics, 5(2), 115-146. Fama, E. F., & Schwert, G. W. (1979). Inflation, interest, and relative prices. Journal of Business, 52(2), 183-209. Fama, E. F. (1981). Stock returns, real activity, inflation, and money. The American economic review, 71(4), 545-565. Fama, E. F. (1990). Stock returns, expected returns, and real activity. The Journal of Finance, 45(4), 1089-1108. Fama, E. F., & French, K. R. (1992). The cross‐section of expected stock returns. the Journal of Finance, 47(2), 427-465. Farka, M. (2009). The effect of monetary policy shocks on stock prices accounting for endogeneity and omitted variable biases. Review of Financial Economics, 18(1), 47-55. Firth, M. (1979). The impact of size, stock market listing, and auditors on voluntary disclosure in corporate annual reports. Accounting and Business research, 9(36), 273-280. Fisher, I. (1930). The theory of interest. New York, 43,1-19. Flannery, M. J., & Protopapadakis, A. A. (2002). Macroeconomic factors do influence aggregate stock returns. The review of financial studies, 15(3), 751-782. Friedman, M. (1988). Money and the stock market. Journal of Political Economy, 96(2), 221-245. Fynn, K. D. (2012). Does the Equity Market affect Economic Growth? Macaleste Review Journal, 2(2), 1-12. Geetha, C., Mohidin, R., Chandran, V. V., & Chong, V. (2011). The relationship between inflation and stock market: Evidence from Malaysia, United States and China. International journal of economics and management sciences, 1(2), 1-16. Goodfriend, M. (2004). Inflation targeting in the United States?. In The Inflation- Targeting Debate. University of Chicago Press, 8(1), 311-352. Granger, C. W. (1981). Some properties of time series data and their use in econometric model specification. Journal of econometrics, 16(1), 121-130. Gultekin, M. N., & Gultekin, N. B. (1983). Stock market seasonality: International evidence. Journal of financial economics, 12(4), 469-481. Habibullah, M. S., & Baharumshah, A. Z. (1996). Money, output and stock prices in Malaysia: an application of the cointegration tests. International Economic Journal, 10(2), 121-130. Han, D. Z., Wu W. B. (2003). Is Chinese stock market a “barometer” of macroeconomics?. Quantitative Economics and Technology Economics Research, 20(5), 59-62. Han X. H., Zheng, H., Wu C. M. (2008). Interpretation of the relationship between stock returns and inflation in China: 1992-2007. Financial Research, 4, 21-36. Harris, J. (1997). William Beveridge: a biography. Oxford University Press on Demand. Hassan, G. M., & Al refai, H. M. (2012). Can macroeconomic factors explain equity returns in the long run? The case of Jordan. Applied Financial Economics, 22(13), 1029-1041. Hess, P. J., & Lee, B. S. (1999). Stock returns and inflation with supply and demand disturbances. The Review of Financial Studies, 12(5), 1203-1218. Homa, K. E., & Jaffee, D. M. (1971). The supply of money and common stock prices. The Journal of Finance, 26(5), 1045-1066. Hosseini, S. M., Ahmad, Z., & Lai, Y. W. (2011). The role of macroeconomic variables on stock market index in China and India. International Journal of Economics and Finance, 3(6), 233-245. Hsing, Y., Budden, M. C., & Phillips, A. S. (2012). Macroeconomic determinants of the stock market index for a major Latin American country and policy implications. Business and Economic Research, 2(1). Humpe, A., & Macmillan, P. (2009). Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan. Applied Financial Economics, 19(2), 111-119. Khan, M. S. (2014). Macroeconomic Variables & Its Impact on KSE-100 Index. Universal Journal of Accounting and Finance, 2(2), 33-39. Kuttner, K. N. (2004). A snapshot of inflation targeting in its adolescence. The future of inflation targeting, 6-42. Kyereboah-Coleman, A., & Agyire-Tettey, K. F. (2008). Impact of macroeconomic indicators on stock market performance: The case of the Ghana Stock Exchange. The Journal of Risk Finance, 9(4), 365-378. Lee, B. S. (1992). Causal relations among stock returns, interest rates, real activity, and inflation. The Journal of Finance, 47(4), 1591-1603. Levine, Ross, and Sara Zervos. (1998). Stock Markets, Banks, and Economic Growth. American Economic Review, 88 (2), 537-558. Liang, Q., Teng, J. Z. (2005). Stock market, banking and economic growth: An empirical analysis of China. Financial Research, 10, 10-19. Li, G. Z. (2002). Banks, stock market and economic growth. Economic Science, 9, 57-62 Li, H. (2002). Employee stock options, residual income valuation and stock price reaction to SFAS 123 footnote disclosures. Residual Income Valuation and Stock Price Reaction to SFAS, 123. Li Man. (2015). Analysis of the Influencing Factors of Stock Prices. Chinese Collective Economy, (25), 70-71. Li Xiao. (2009). Options for East Asian Monetary and Financial Cooperation under the Global Financial Crisis. Northeast Asia Forum, (5), 3-25. Li, X., Chen L.Y. (2009). Study on the Impact of Monetary Policy Changes on Stock Market Volatility. Search, 2, 33 - 35. Liljeblom, E., & Stenius, M. (1997). Macroeconomic volatility and stock market volatility: empirical evidence on Finnish data. Applied financial economics, 7(4), 419-426. Liu J.Q, Wang F.Y. (2004). The empirical analysis of the relationship between return on assets and inflation rate. Financial Research, 1, 123-128. Liu Ling, Xie Chi, & Zeng Zhijian. (2006). Empirical study on the relationship between stock price index and macroeconomic variables. Journal of Social Science of Hunan Normal University, 35(5), 82-86. Luthra, M., & Mahajan, S. (2014). Impact of macro factors on BSE Bankex. International Journal of Current Research and Academic Review, 2(2), 179-186. Lu X. W. (2013). Dictionary of Management: Shanghai Dictionary Press. Ma, J., Guan, W. (2006). An Empirical Analysis of the Relationship between Chinese Stock Market and Macroeconomics. Research on Financial Issues, 8, 71-75. Marshall, L. L. (1992). The severity of violence against men scales. Journal of Family Violence, 7(3), 189-203. Maysami, R. C., Howe, L. C., & Rahmat, M. A. (2005). Relationship between macroeconomic variables and stock market indices: Cointegration evidence from stock exchange of Singapore's All-S sector indices. UKM Journal of Management, 24, 47-77. McQueen, G., & Roley, V. V. (1993). Stock prices, news, and business conditions. The Review of Financial Studies, 6(3), 683-707. Mitchell, H., & Joseph, S. (2010). Changes in Malaysia: Capital controls, prime ministers and political connections. Pacific-Basin Finance Journal, 18(5), 460-476. Modigliani, F., & Cohn, R. A. (1979). Inflation, rational valuation and the market. Financial Analysts Journal, 35(2), 24-44. Mohi-u-Din, S., & Mubasher, H. M. (2013). Macroeconomic variables on stock market interactions: The Indian Experience. Advances in Management, 6(8), 39-51. Morley, B., & Pentecost, E. J. (2000). Common trends and cycles in G-7 countries exchange rates and stock prices. Applied Economics Letters, 7(1), 7-10. Mukherjee, T. K., & Naka, A. (1995). Dynamic relations between macroeconomic variables and the Japanese stock market: an application of a vector error correction model. Journal of Financial Research, 18(2), 223-237. Nakagawa, S., & Osawa, N. (2000). Financial Market and Macroeconomic Volatility Relationships and Some Puzzles (No. Research and Statistics Department, 00-9). Bank of Japan. Nelson, C. R. (1976). Inflation and rates of return on common stocks. The journal of Finance, 31(2), 471-483. Nieh, C. C., & Lee, C. F. (2002). Dynamic relationship between stock prices and exchange rates for G-7 countries. The Quarterly Review of Economics and Finance, 41(4), 477-490. Nkechukwu, G., Onyeagba, J., & Okoh, J. (2013). Macroeconomic variables and stock market prices in Nigeria: A cointegration and vector error correction model tests. International Journal of Science and Research, 4(6), 717-724. Oluseyi, A. S. (2015). An empirical investigation of the relationship between stock market prices volatility and macroeconomic variables' volatility in Nigeria. European Journal of Academic Essays, 2(11), 1-12. Pal, K., & Mittal, R. (2011). Impact of macroeconomic indicators on Indian capital markets. The Journal of Risk Finance, 12(2), 84-97. Pan, M. S., Fok, R. C. W., & Liu, Y. A. (2007). Dynamic linkages between exchange rates and stock prices: Evidence from East Asian markets. International Review of Economics & Finance, 16(4), 503-520. Pareira, D. (2010). Inflation, Real Stock Prices and Earnings: Friedman was Right. Universitat Pompeu Fabra, 4(7), 1-51. Patel, S. (2012). The effect of macroeconomic determinants on the performance of the Indian stock market. NMIMS Management Review, 22(1), 117-127. Purnomo, B., & Rider, M. W. (2012). Domestic and Foreign Shocks and the Indonesian Stock Market: Time Series Evidence. Georgia State University, 1-28. Ratner, B. (2009). The correlation coefficient: Its values range between+ 1/− 1, or do they?. Journal of targeting, measurement and analysis for marketing, 17(2), 139-142. Rapach, D. E., Wohar, M. E., & Rangvid, J. (2005). Macro variables and international stock return predictability. International journal of forecasting, 21(1), 137-166. Richardson, S., & Sloan, R. (2003). External financing and future stock returns. Unpublished working paper, Wharton School. Rozeff, M. S. (1974). Money and stock prices: Market efficiency and the lag in effect of monetary policy. Journal of financial Economics, 1(3), 245-302. Schwert, G. W. (1981). Using financial data to measure effects of regulation. The Journal of Law and Economics, 24(1), 121-158. Sharif, T., Purohit, H., & Pillai, R. (2015). Analysis of Factors Affecting Share Prices: The Case of Bahrain Stock Exchange. International Journal of Economics and Finance, 7(3), 207-216. Shiller, R. J. (1980). Do stock prices move too much to be justified by subsequent changes in dividends?. American Economic Review, 71(1), 421-436. Singh, S., Sedgh, G., & Hussain, R. (2010). Unintended pregnancy: worldwide levels, trends, and outcomes. Studies in family planning, 41(4), 241-250. Sohail, N., & Zakir, H. (2010). Macroeconomic determinants of stock returns in Pakistan: the case of Karachi Stock Exchange. Journal of Advanced Studies in Finance, 1(2), 181-187. Solnik, B. (1987). Using financial prices to test exchange rate models: a note. Journal of Finance, 42(1), 141-149. Sudhakaran, S., & Balasubramanian, P. (2016, September). A study on the impact of macroeconomic factors on S&P BSE Bankex returns. In Advances in Computing, Communications and Informatics (ICACCI), 2016 International Conference on (pp. 2614-2618). IEEE. Sun, H, Q., Deng, Y. (2009). Stock Prices, Macroeconomic Variables and Monetary Policy-Cointegration Analysis of Chinese Financial Markets. Economic Review, 9(4), 54-57. Talla, J. T. (2013). Impact of macroeconomic variables on the stock market prices of the Stockholm stock exchange (OMXS30). Masters thesis in International Financial Analysis ,Jonkoping International Business School, 1-48. Tobin, J. (1958). Estimation of relationships for limited dependent variables. Econometrica: journal of the Econometric Society, 24-36. Tripathi, V., & Kumar, A. (2014). Relationship between Inflation and stock returns– evidence from BRICS markets using panel co-integration test. International Journal of Accounting and Financial Reporting, 4(2), 647-658. Tsoukalas, D. (2003). Macroeconomic factors and stock prices in the emerging Cypriot equity market. Managerial Finance, 29(4), 87-92. Vanita, T., & Khushboo, A. (2015). Long Run Co-Integrating Relationship between Exchange Rate and Stock Prices: Empirical Evidence from BRICS Countries. Advances in Management, 8(1), 15-25. Wang, J. G., Xu, Y. (1995). Empirical Analysis of China's Stock Market. Quantitative Economics, Technology, and Economic Research, 12, 63-67. Wang, P. H. (2010). Currency Shock and Asset Price Fluctuation: An Empirical Analysis Based on China's Stock Market. Financial Research, 7, 59 - 69. Wongbangpo, P., & Sharma, S. C. (2002). Stock market and macroeconomic fundamental dynamic interactions: ASEAN-5 countries. Journal of Asian Economics, 13(1), 27-51. Xiao, Y., Ni, Y. J., Fang, Z. (2012). Research on Stock Prices, Real Economy and Monetary Policy-Based on Chinese Empirical Evidence from 1997-2011. Economic Review, 12(2), 97-104. Yang, X. Y., Li, H. Z. (2002). An Analysis of the Quantitative Relationship between Chinese Stock Market and Macroeconomics. Financial Theory and Practice, 23(5), 45-51. Yi, G., Wang, Z. (2002). Monetary policy and financial asset prices. Economic Research, 3, 13-20. Yusof, R. M., & AbdulMajid, S. (2007). Stock market volatility transmission in Malaysia: Islamic versus conventional stock market. Islamic Economics, 20(2), 17-35. Zhang Lijun, & Gong Zhiyong. (2009). Research on the simultaneous equation model of macroeconomic factors affecting the fluctuation of the securities market. Journal of Shenzhen Polytechnic, 2, 003. Zhao, H. N. (2011). An Empirical Analysis of Macro Influencing Factors of Stock Prices. Collective Economy. Tax Finance, 11(2), 117-120. Zhao, Z. Q., Xue, F. H. (2004). An Empirical Analysis of the Impact of Financial Development on Economic Growth. Financial Research, 8, 94-99. Zhao, Z, Q., Zhang, Y. (2003). An Empirical Analysis of the Relationship between Fluctuations in Chinese Stock Market and Macroeconomic Fluctuations. Quantitative Economics, Technology, and Economic Research, 20(6), 143-146. Zhu X. M., & Sun A. T. (2011). An Empirical Analysis of the Relationship between Chinese GDP and Broad Money Supply M2. Business Times, 28, 43-44.

Similar Items