Stock Returns and Macroeconomic Influences: Evidence from the Six Asian-Pacific Countries

Financial Economics and Futures Market Research Paper

21 Pages Posted: 25 Jun 2007

See all articles by Wan Mansor Mahmood

Wan Mansor Mahmood

Universiti Teknologi MARA (UiTM)

Nazihah Mohd Dinniah

Futures Market Research Group

Date Written: 2007

Abstract

We examine the dynamics relationship between stock prices and economic variables in six Asian-Pacific selected countries of Malaysia, Korea, Thailand, Hong Kong, Japan, and Australia. The monthly data on stock price indices, foreign exchange rates, consumer price index and industrial production index that spans from January 1993 to December 2002 are used. In particular, we focus our analysis on the long run equilibrium and short run multivariate causality between these variables. The results indicate the existing of a long run equilibrium relationship between and among variables in only four countries, i.e., Japan, Korea, Hong Kong and Australia. As for short run relationship, all countries except for Hong Kong and Thailand show some interactions. The Hong Kong shows relationship only between exchange rate and stock price while the Thailand reports significant interaction only between output and stock prices. An accurate estimation of the relationship between the economic variables and stock market behaviour enables the investors - both local and foreign to make effective investment decisions. At the same time, for the policy makers, a precise prediction of this type of relationship may help government agencies in designing policies to encourage more capital inflows into the respective countries' capital market.

Keywords: Stock returns, Macroeconomic Influences, Asian-Pacific Countries

JEL Classification: E31, G12

Suggested Citation

Wan Mahmood, Wan Mansor and Mohd Dinniah, Nazihah, Stock Returns and Macroeconomic Influences: Evidence from the Six Asian-Pacific Countries (2007). Financial Economics and Futures Market Research Paper. Available at SSRN: https://ssrn.com/abstract=995108 or http://dx.doi.org/10.2139/ssrn.995108

Wan Mansor Wan Mahmood (Contact Author)

Universiti Teknologi MARA (UiTM) ( email )

Sura Hujung
Dungun, Terengganu 23000
Malaysia
609 8403774 (Phone)
609 8403777 (Fax)

HOME PAGE: http://www.tganu.uitm.edu.my/

Nazihah Mohd Dinniah

Futures Market Research Group

United States

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