Relationship between Stock Price and Macroeconomic Variables: Empirical Evidence from the Asia-Pacific Region

Abstract

<p><strong>Abstract: </strong>This paper examines the relationship between stock price and various macroeconomic variables (economic growth, inflation, money supply, exchange rate and interest rate) in Asia-Pacific region for the period from 1998Q3 to 2021Q1. The study considered ten countries of Asia-Pacific region, i.e., India, Malaysia, Hong Kong, Singapore, South Korea, Japan, China, Indonesia, Philippines and Thailand. The study employed panel unit root tests, panel cointegration tests, dynamic ordinary least square (DOLS) estimator and panel vector error correction model to study the long-run and short-run relationship among the variables. The findings suggest that there exists a robust long-run economic relationship between stock price and various macroeconomic variables. In short-run, the study reveals a complex network of causal relation using Granger causality test. The results of DOLS estimation show that coefficients of economic growth, inflation, money supply and exchange rate are positive except interest rate which is negative and significant at 5% level.</p><p><strong>JEL Classification:  </strong>G10, E44, C23, N25</p><p><strong>Keywords: </strong>Stock Price, Macroeconomic Variables, Panel Data Analysis, DOLS, Asia-Pacific Region</p&gt