The Effect of Macroeconomic Variables on Stock Prices: A Conceptual Framework of the Arbitrage Pricing Theory

Ganpat University-Faculty of Management Studies Journal of Management and Research, Vol. 5, 2012

16 Pages Posted: 10 Feb 2014

See all articles by Shivangi Singh

Shivangi Singh

Nirma University - Institute of Management

Dhiren Jotwani

Nirma University

Date Written: January 10, 2013

Abstract

The relationship between fundamental macroeconomic variables of the economy and stock markets is an essential one. It affects the perspective of monetary and fiscal policy decisions, portfolio management and economic development. It has been studied that macroeconomic variables can influence investors' investment decisions. Over the world, many researchers have investigated the relationships between stock market prices and various macroeconomic variables. The focus of the current paper is to investigate whether the share price index can be considered as a reflection of economic activities in India. This study investigates the impact of five selected macroeconomic variables on Stock Market Liquidity of S&P CNX Nifty. As a result of this analysis, a simple model of the influence of macroeconomic fundamentals on the stock market index has been suggested. For better stock market performance, policy makers should put in place measures that will ensure a stable macroeconomic environment.

Keywords: Arbitrage Pricing Theory, Macroeconomic Fundamentals, Stock Price Movement

JEL Classification: O00, N20, G20

Suggested Citation

Singh, Shivangi and Jotwani, Dhiren, The Effect of Macroeconomic Variables on Stock Prices: A Conceptual Framework of the Arbitrage Pricing Theory (January 10, 2013). Ganpat University-Faculty of Management Studies Journal of Management and Research, Vol. 5, 2012, Available at SSRN: https://ssrn.com/abstract=2393219

Shivangi Singh (Contact Author)

Nirma University - Institute of Management ( email )

Sarkhej-Gandhinagar Highway
Via Gota
Ahmedabad, Gujarat 382481
India

Dhiren Jotwani

Nirma University ( email )

Sarkhej-Gandhinagar Highway
Gota
Ahmedabad, Gujarat 382 481
India

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