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Impact of Macroeconomic Factors On Indian Stock Market
Impact of Macroeconomic Factors On Indian Stock Market
Course :
Econometrics : Theory and Application.
•X3 = GDP
DATA SET FOR THE STUDY
UNEMPLOYM
ENT RATE
FOREIGN
RESERVES
INFLATION RATE
gdp
sensex
SENSEX DATA FOR LAST 10 YEARS
● This research considers four macroeconomic variables: Consumer Price Index (CPI) as proxy
for inflation rate, Exchange Rate (ER), Money Supply (MS) and Interest Rate (IR).
● Ordinary Least Squared (OLS) method used to test impact of macroeconomic variable based
on monthly data from January, 1993 to December, 2012.
● The linear regression test results show that high inflation and Swedish krona depreciation
against the Euro are negatively and significantly related to the stock prices of the Exchange.
● A positive relationship is found between stock price and money supply although it is
insignificant.
● Inflation is the only macroeconomic variable that causes stock price.Stock price has no effect
on any of the macroeconomic variables.
● Overall analysis, inflation and exchange rate are relatively significant factors and likely to
influence the stock prices of the Exchange.
The impact of macroeconomic indicators on Vietnamese stock prices Khaled Hussainey
Accounting and Finance Division, Stirling Management School, University of Stirling,
Striling, UK, and Le Khanh Ngoc The University of Labour and Social Affairs, Ha Noi,
Viet Nam
● Our study focuses on the available data from January 2001 to April 2008 of stock prices and
macroeconomics data for 88 months collected for USA and Vietnam.
● First approach is the multivariate vector autoregression modeling technique vector error
correction.
● It was found that the industrial production has a positive effect on Vietnamese stock prices.
● Also it was noted that the long- and short-term interest rates are not affecting stock prices in
the same direction.
● Finally was found that the US real production activity has stronger effect on Vietnamese share
prices that in comparison with the US money market.
The Effect of Inflation, Interest Rates and Exchange Rates on Stock Prices Comparative
Study Among Two Gcc Countries
● Objective was to investigate if stock prices and exchange rates are related to each other or not.
Both the short term and the long term association between these variables are discovered.
● The study applies monthly and quarterly data on two gulf countries, including Kingdom Saudi
Arabia (KSA) and United Arab Emirate (UAE) for the period January 2008 to December 2009.
● Short term results found that the exchange rate influences positively on the stock market price
index for UAE and there is no association between them for KSA.
● Long term studies state that the exchange rate influence negatively on stock market price index
for UAE. While no association between these variables in KSA.
Stock Prices and the Macro Economy in China
● This paper analyses the relationship between stock prices and the Chinese macro economy
measured by the level of GDP.
● Focuses on the empirical nature of this relationship which we analyse in the context of a
VAR/VEC model which allows for two-way influences but is agnostic about the particular
theoretical underpinnings.
● Applying tests for stationarity and cointegration we found that there is a long-run, cointegrating
relationship between stock prices and GDP.
● We estimate a VEC model and use it to analyse both short-run and long-run causality as well
as to generate impulse response functions (IRFs).
● Found that there is strong evidence of long-run causality from the economy to the stock market
but not vice versa.
● Also found modest but weaker evidence of a similar short-run effect. These are borne out by
the IRFs which show a small and weak link from the stock market to the economy but a
stronger and much more substantial effect in the opposite direction.
Relationships Between Stock Markets and Macroeconomic Variables: an Empirical
Analysis of the Istanbul Stock Exchange
● Objective was to investigate the relationships between the returns in Istanbul Stock Exchange
(ISE) and macroeconomic variables of Turkish economy.
● Employing cointegration tests and vector error correction model (VECM) on a quarterly data
set, we find long-term stable relationships between ISE and four macroeconomic variables,
GDP, exchange rate, interest rate, and current account balance.
● Consistent with the existing literature, changes in GDP, foreign exchange rate and current
account balance have an effect on ISE index.
● On the contrary to expectations, changes in the stock market index do affect interest rates.
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