Does Macroeconomic Indicators exert shock on the Nigerian Capital Market?

This study examines the long-run and short-run effect of macroeconomic variables on the Nigerian capital market between 1984 and 2007. The properties of the time series variables are examined using the Augmented Dickey-Fuller (ADF) test and most of the variables have a unit root at level. The Augmented Engle-Granger Cointegration test revealed that macroeconomic variables exert significant long-run effect on stock market performance in Nigeria. Also, the employed Error Correction Model (ECM) showed that macroeconomic variables exert significant short-term shock on stock prices as a result of the stochastic error term mechanisms. However, the empirical analysis showed that the NSE all share index is more responsive to changes in exchange rate, inflation rate, money supply and real output. While, all the incorporated variables which serve as proxies for external shock and other macroeconomic indicators have simultaneous significant impact on the Nigerian capital market both in the short and long-run.Economic Shock; Macroeconomic Variables; Capital Market; Unit root and Cointegration.

Assessing the Dynamic Relationship Between Macroeconomic Factors and Stock Market Movement: Evidence from China

This paper examines short-run and long-run dynamic relationships between selected macroeconomic variables and stock prices in the China Stock Exchange proxy by Shanghai Composite Index. The data is restricted to the period for which quarterly data are available from 1992 Q1 to 2019 Q4 (112 observations) retrieved from the Federal Reserve Bank of Saint Louis, GTA-CSMAR database, and CEIC Database. The study employs unit root test, cointegration test, vector error correction estimates, and Innovation Accounting (impulse response test). A Johansen-Juselius cointegration test indicates a positive long run relationship between the Chinese stock price index and exchange rate, and a negative long run relationship with the gross domestic product, and M2 money supply. An estimated vector error correction model (VECM) suggests significant unidirectional short run causal relationships between Chinese stock market returns and money supply but not for inflation. The VECM also finds a significant long run causal relationship among the macroeconomic variables in the system. The estimated speed of adjustment indicates that the Chinese stock market converges to the equilibrium within half a year. Impulse response function analysis shows no significant relationship between China stock market returns and the macroeconomic variables. Forecast error variance decompositions suggest that 76% of the variation in Chinese stock market returns is attributable to its own shock, which implies that Chinese stock market returns are relatively independent of the macroeconomic variables in the system. Keywords: Stock Prices, Macroeconomic Variables, Cointegration, Innovation Accounting, China. JEL Classification: G15, E44, C58, O53 DOI: 10.7176/RJFA/12-6-02 Publication date:March 31st 2021

The recent dynamics of the stock exchange in Brazil

Abstract. This study is a literary analysis with the purpose of verifying the dynamic relation of the São Paulo stock exchange index with some macroeconomic variables, between January 2014 and August 2017, when Brazil was going through a serious political crisis, in which the economic activity was affected and therefore the stock market. Thus, these relationships are evaluated by the Johansen Cointegration Test to precisely verify the long-term relationship between the Brazilian stock market and the other variables. And the results indicate a negative weight of inflation expectations, interest rates and public debt, while the exchange rate and economic activity positively affect the stock market index.Keywords. Stock price, Index of the São Paulo Stock Exchange, Johansen Cointegration Test.JEL. C13, E44, G12

Short-run and Long-run Dynamics of Stock Prices and Exchange Rates in Developing Economies: Evidence from Malawi.

The study investigates the short-run and long-run dynamic relationship between stock prices and exchange rate in Malawi from January 1999 to January 2010. The study also considers the effect of internal and external macroeconomic structural shocks on the stock and foreign exchange markets. The data series consisted of the MSE stock price index, the nominal exchange rate, interest rate and JSE stock price index. The analysis used Johansen procedure for testing possibility of cointegration among the time series data. The results reveal no evidence of long-run relationship between the variables. We then employed standard Granger causality approach for testing the direction of causality. The Granger causality results show that stock prices and exchange rates do not cause each other during the period of the analysis. Our results further indicate that internal and external macroeconomic shocks do not have immediate influence on the stock and foreign exchange markets. Keywords: Stock prices, Exchange rates, Granger causality, Cointegration test, Malaw

Do Macroeconomic Variables Influence Domestic Stock Market Price Behaviour in Emerging Markets? A Johansen Cointegration Approach to the Botswana Stock Market

The ability of the stock market to reflect real economic activities through fundamental macroeconomic variables in emerging markets remains paramount considering the role of stock markets in the financial system. This paper explores the long-term equilibrium relationship between the Botswana stock market price and selected domestic and global macroeconomic variables using quarterly data for the period 1998 to 2012. The selected macroeconomic variables included Gross Domestic Product (GDP), long and short-term interest rates, money supply, foreign reserves, inflation, diamond price index, exchange rate, US share price index and 10 Year US government bond yield. The paper employs VECM framework following Johansen’s cointegration technique. The analysis revealed that macroeconomic variables and the stock market price are cointegrated, hence, a long-run equilibrium relationship existed between them. The results showed that in the long run, real GDP, short-term interest rates, inflation and diamond index are positively related with stock market price. However, long-term real interest rate, money supply, foreign reserves, exchange rate, US share price index and US government bond yield are negatively related with stock market price in the long run

A study on the dynamic relations between macro economic variables and stock market performance / Huzaimi Hussain, Jaafar Pyeman and Mohd. Mokhtar Ghani

The purpose of this study is to investigate the dynamic relationship between stock market performance and macroeconomic variables in Malaysia. The Kuala Lumpur Composite Index (KLCI) is used to proxy for the stock market performance and macroeconomic variables employed are three-month treasury bills rate, inflation rate, and economic growth as measured by gross domestic product. This study utilizes cointegration and causal relationship approach to accomplish the research objectives. The findings from this study exhibit that there are long run cointegration relationship between stock market performance and macroeconomic indicators. Moreover, results of further analysis generally show that all the indicators have substantial impacts on KLCI with the most immediate impact coming from treasury bills rate. In addition it is shown via the variance decomposition procedure that treasury bills rate is highly exogenous. The major policy implication of this study is that market performance can be monitored by Central Bank through treasury bills rate

Can macroeconomic variables explain long term stock market movements? A comparison of the US and Japan

Within the framework of a standard discounted value model we examine whether a number of macroeconomic variables influence stock prices in the US and Japan. A cointegration analysis is applied in order to model the long term relationship between industrial production, the consumer price index, money supply, long term interest rates and stock prices in the US and Japan. For the US we find the data are consistent with a single cointegrating vector, where stock prices are positively related to industrial production and negatively related to both the consumer price index and a long term interest rate. We also find an insignificant (although positive) relationship between US stock prices and the money supply. However, for the Japanese data we find two cointegrating vectors. We find for one vector that stock prices are influenced positively by industrial production and negatively by the money supply. For the second cointegrating vector we find industrial production to be negatively influenced by the consumer price index and a long term interest rate. These contrasting results may be due to the slump in the Japanese economy during the 1990s and consequent liquidity trap.Stock Market Indices, Cointegration, Interest Rates.

Long-run relationships and dynamic interactions between housing and stock prices in Malaysia

Economists recognise that macroeconomic and financial variables have an impact on housing prices. In this study, we focus on the relationship between housing prices and stock prices in Thailand using quarterly data from the first quarter (Q1) of 1995 till the last quarter (Q4) of 2006. The analysis is conducted within a multivariate setting that incorporates the Stock Exchange of Thailand Composite Index and housing prices, the real gross domestic product and the consumer price index. In this paper, the autoregressive distributive lags (ARDL) cointegration test is applied to examine the variables' long-run relationships. We then employ the ARDL, DOLS and ML approaches to estimate the long-run parameters and impulse response functions based on a vector autoregression (VAR) framework to explore their dynamic interactions. Our results indicate positive relationships between housing prices and the macroeconomic and financial variables chosen. As regards their dynamic interactions, we note significant responses of housing prices to shocks in the three variables

Do Exchange Rate Changes Have Symmetric or Asymmetric Effects on Stock Prices?

This study employs the bounds testing approach to cointegration to examine the short run and long run dynamics between stock prices and exchange rates, accounting for few other macroeconomic variables such as Consumer Price Index, Industrial Production Index, nominal money supply (M2) which are known to have effects on stock prices as well. The main contribution of this paper which is absent in the literature is that the change in nominal effective exchange rate is decomposed into partial sum of positive changes and negative changes to determine whether the changes in exchange rates have symmetric or asymmetric effects on stock prices. The analysis is applied to both developed and developing countries over the period of 1973-2015. The results show that the effect of exchange rate changes is asymmetric on stock prices. Furthermore, I disaggregate data at the sectoral level for the U.S. stock market to investigate the performance of different sectors due to changes in macroeconomic variables and results show that different sectors react differently to changes in macroeconomic variables and exchange rate changes have asymmetric effects on the stock price indices of different sectors in the U.S