scholarly journals Are Asian Markets and Developed Markets Interlinked? An Application of Causality Approaches

2021 ◽  
Vol 9 (10) ◽  
pp. 375-382
Author(s):  
Dr. Archana Dixit
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Stock Returns ◽  
Inflation Rate ◽  
Developed Countries ◽  
Data Series ◽  
P Value ◽  
Causality Test ◽  
Stock Market Returns ◽  
Adf Test

Abstract: This paper examined the relationship between the stock market returns for three Asian countries and three developed countries. It Investigate two way causality among exchange rate, inflation rate, GDP, with stock returns of the sample countries. This paper examines long term and short term co movement of stock indices of stock market. To check the stationary this study apply unit root test, OLS test and found that data is stationary. This study used ADF test with and without intercept till data become intercept till the data become stationary. The data series is stationary at i(1) and 2 difference and intercept level as presented in above tables. The P value of ADF test in India GDP value is 0.0006, India exchange rate is 0.0002, and Indian stock return is 0.0001 which are less than 5%. It means data series is stationary. Bangladesh exchange rate is 0.0004, inflation rate is 0.0001, stock returns 0.0004. Also predicting the value of ADF test equation the coefficient value ids negative in all cases suggesting that the model is fit.. To investigate the causality The Granger causality test was applied to check the causal relationship between the variables and found that hypothesis is not rejected so there is no causality between the variable.

Crude oil and GCC stock markets

2020 ◽  
Vol 14 (4) ◽  
pp. 745-756 ◽  
Author(s):  
Abdullah Alqahtani ◽  
Amine Lahiani ◽  
Ali Salem
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Oil Prices ◽  
Least Square ◽  
Data Series ◽  
Causality Test ◽  
Stock Market Returns ◽  
Content Type ◽  
Gcc Countries

Purpose This paper aims to investigate the transmission of international oil prices to the stock market indices of the Gulf Cooperation Council (GCC) countries over the weekly period from April 07, 2004, to August 15, 2018. Design/methodology/approach The authors use the augmented Dickey–Fuller (ADF) unit root test to check the order of integration of data series. Afterward, the authors use the ordinary least square method to determine the spillover of international oil prices to the stock markets of GCC countries while accounting for the time-varying volatility of oil and stock market returns through the generalized autoregressive conditional heteroskedasticity. Then, the Johansen (1991) cointegration test is used to determine the long-run equilibrium relationship. Finally, the Granger (1969) causality test is used to determine the short-run causal effects between oil and the stock markets returns of GCC countries. Findings The findings indicate that the stock markets of GCC countries are efficient and respond significantly to international oil prices and evidence of high volatility associated with oil returns. Originality/value Investors and portfolio managers should consider the association between international oil prices and GCC stock returns when allocating their funds for diversification strategy. Moreover, policymakers should better understand the behavior of local stock markets.

scholarly journals Effects of Exchange Rate and Inflation Rate on Stock Market Returns Volatility in India.

2020 ◽  
Author(s):  
Nenavath Sre ◽  
Suresh Naik
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Error Correction ◽  
Inflation Rate ◽  
Market Returns ◽  
Stock Market Returns ◽  
Positive Effects ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

Abstract The paper investigates the effect of exchange and inflation rate on stock market returns in India. The study uses monthly, quarterly and annual inflation and exchange rate data obtained from the RBI and market returns computed from the Indian share market index from January, 2000 to June, 2020.The paper uses the autoregressive distributed lag (ARDL) co-integration technique and the error correction parametization of the ARDL model for investigating the effect on Indian Stock markets. The GARCH and its corresponding Error Correction Model (ECM) were used to explore the long- and short-run relationship between the India Stock market returns, inflation, and exchange rate. The paper shows that there exists a long term relationship but there is no short-run relationship between Indian market returns and inflation. But, there is periodicity of inflation monthly considerable long run and short-run relationship between them existed. The outcome also illustrates a significant short-run relationship between NSE market returns and exchange rate. The variables were tested for short run and it was significantly shown the positive effects on the stock market returns and making it a desirable attribute of which investors can take advantage of. This is due to the establishment of long-run effect of inflation and exchange rate on stock market returns.

scholarly journals Are Kuwaiti Stock Returns Affected by Fluctuations in Oil Prices?

2020 ◽  
Vol 11 (6) ◽  
pp. 1
Author(s):  
Salem Alshihab ◽  
Nayef AlShammari
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Oil Prices ◽  
Market Returns ◽  
Macroeconomic Factors ◽  
Stock Market Returns ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Adf Test

This paper examines the impact of fluctuations in the price of oil on Kuwaiti stock market returns for the month-to-month period of 2000 to 2020. The Augmented Dickey-Fuller (ADF) test for stationarity, the error correction model (ECM), and various cointegration test techniques were used to examine the estimated model. In an oil-based economy like Kuwait, the exposure to oil prices seems to affect the performance of the country’s stock market. Our main findings related to the long run showed that the price of oil is cointegrated with stock market returns. Interestingly, our ECM examination confirmed that changes in Kuwaiti stock market returns are only affected by oil price fluctuations in the short run. Further strategies are needed to better stabilize Kuwait’s capital market. This equilibrium can be achieved by pursuing more stability in other macroeconomic factors and providing a solid legal independence for the country’s financial market.

scholarly journals Impacts of Macroeconomic Variables on the Stock Market Returns of South Asian Region

2020 ◽  
pp. 24-34 ◽  
Keyword(s):  
Growth Rate ◽  
Exchange Rate ◽  
Stock Market ◽  
Inflation Rate ◽  
Foreign Currency ◽  
Currency Reserve ◽  
Gdp Growth ◽  
Market Returns ◽  
Stock Market Returns ◽  
Gdp Growth Rate

This paper is intended to find out whether macroeconomic variables may impact on the stock market as well as whether such impact has any country specific pattern. The stock market return was taken as the dependent variable and real interest rate, inflation rate, GDP growth rate, foreign currency reserve growth rate, fiscal deficit, FDI to GDP ratio, exchange rate were taken as independent variables. Data-set was covered from 1993 to 2019 for five South Asian countries which were Bangladesh, India, Pakistan, Sri Lanka, and Nepal. The pattern of the stock market, as well as macro conditions of these countries, was observed and it was found that some relationships exist between the stock market returns and these chosen independent variables. Unit root test, Heteroscedasticty test, autocorrelation test, Hausman test is conducted to authenticate and clarified data to investigate relationship nature. Granger Casualty test indicated that there exist cause and effect relationship between GDP growth rate, exchange rate, and stock market returns. Finally, the regression test reveals that the inflation rate and foreign currency reserve growth rate have a significant impact on the stock market returns. It was expected to have the unique nature of different countries having versatile impact on dependent, so additionally fixed effects model and random effects model were run and it was found that the random effects model is statistically appropriate through conducting the Hausman test. The test reveals that GDP growth rate, foreign currency reserve growth rate, and fiscal deficit positively impact the stock market returns and these also support the literature review. Interest rates, inflation rate, FDI to GDP ratio, and exchange rate have negatively impacted the stock market return where only interest rate, inflation rate & exchange rate.

scholarly journals Macroeconomic Variables and Stock Market Returns in Sri Lanka

2017 ◽  
Vol 9 (2) ◽  
pp. 206
Author(s):  
Saseela Balagobei
Keyword(s):  
Exchange Rate ◽  
Sri Lanka ◽  
Stock Market ◽  
Inflation Rate ◽  
Stock Exchange ◽  
Market Returns ◽  
Stock Market Returns ◽  
Macroeconomic Variables ◽  
Market Return ◽  
Stock Market Return

The stock market is one of the most energetic sectors that play an important role in contributing to the wealth of the economy. It plays a crucial role in the economic growth and development of an economy which would benefit industries, trade and commerce as a whole. The aim of this study is to investigate the impact of macroeconomic variables on stock market returns in Sri Lanka. Dependent variable of this study is stock market return measured by All Share Price Index (ASPI) and All Share Total Return Index (ASTRI) and independent variables are macroeconomic variables, such as Interest Rate (IR), Inflation Rate (INF), Exchange Rate (ER), Factory Industry Production Index (FIPI) and money supply (MS).  The study targets all the companies listed and active in Colombo Stock Exchange (CSE) from 2006 to 2015. For analysis, secondary data was collected from annual reports of Central bank of Sri Lanka, Colombo Stock Exchange, Securities and Exchange Commission and Department of Census and Statistics. The results of the study reveal that the stock market returns is influenced by macroeconomic variables except money supply in Sri Lanka. Interest rate and factory industry production have negative influence on stock market return in Colombo Stock exchange while inflation rate and exchange rate have positive influence on stock market return. The findings of the study may be useful to public and economy especially stock market investors to focus the macroeconomic variables for making their effective decisions in order to enhance their stock market returns.

scholarly journals Dynamic Relationship between Stock Market Returns and Trading Volume: Evidence from Indian Stock Market

2016 ◽  
Vol 12 (2) ◽  
pp. 123-136
Author(s):  
NUPUR GUPTA BHATTACHARYA ◽  
Gopal Zavar
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Trading Volume ◽  
Information Dissemination ◽  
Emerging Market ◽  
Causality Test ◽  
Stock Market Returns ◽  
Dynamic Relationship ◽  
Contemporaneous Correlation ◽  
Total Turnover

This paper empirically examines the relationship between the stock returns & the trading volume for Sensex. Three main measures of volume traded namely number of shares traded; total turnover of the shares traded & the no. of transactions are used. Their daily data for a five year period were taken for the study. The contemporaneous correlation between the volume & returns was studied after it was found that there was no unit root in the data. A positive contemporaneous relation between the volume & the returns was found. The results from Granger causality test suggest us that the returns granger causes volume for Sensex. VAR test also suggests that the stock returns are dependent on the returns of the previous days. It can be explained as in an emerging market like India, the market development cause the sequential information dissemination. It can also be concluded that in Sensex, no. of transactions can prove to be a better proxy of information than number of shares traded or turnover.

scholarly journals CO-MOVEMENT AND CAUSAL RELATIONSHIP BETWEEN STOCK MARKET AND MACROECONOMIC VARIABLES: LATEST EVIDENCE FROM MALAYSIA

2019 ◽  
Vol 1 (1) ◽  
pp. 25-35
Author(s):  
Mohamad Azwan Md Isa ◽  
Norashikin Ismail ◽  
Ruziah A Latif ◽  
Nor Hadaliza Abd Rahman ◽  
Nurul Farhana Mazlan
Keyword(s):  
Stock Market ◽  
Causal Relationship ◽  
Foreign Currency ◽  
Gold Price ◽  
International Reserves ◽  
Data Series ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Adf Test

Previous studies pertaining to the co-movement and causal relationship between Malaysian stock markets and domestic macroeconomic variables are by now quite well documented. Nonetheless, to the best of authors’ knowledge, there is a void in the literature about foreign macroeconomic variables. Therefore, this paper aims to examine co-movement and causal relationship between FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) with foreign macroeconomic variables namely world crude oil price, gold price, and five world major stock market indices; Singapore’s Straits Times Index (STI), Chinese Shanghai A-Share Index (SHAI), the US’s Dow Jones Industrial Average (DJIA), Hong Kong’s Hang Seng Index (HSI) and Japanese Nikkei 225 Index (NIK). We also include domestic macroeconomic variables namely private sector domestic credit, gross international reserves and foreign currency assets, and an exchange rate of Malaysian ringgit (MYR) to the US dollar (USD) in this study. Using 9-year monthly data series from 2010 to 2018, the Augmented Dickey-Fuller (ADF) test reveals that data series have unit root in level order, but become integrated when converted into the first difference. The t-statistics of the Trace test suggests that FBMKLCI co-moves with Malaysian gross international reserves and foreign currency assets, world gold price and STI in the long run, respectively. Further, the VECM notes the absence of long-run or short runs causal relationships except Singapore’s STI to FBMKLCI in the short run. The pairwise Granger causality test indicates a one-way causal relationship running from FBMKLCI to gross international reserves and foreign currency assets. The findings benefit stock market investors, diversified portfolio fund managers, market regulators, and policymakers besides enriching the existing literature.

Do Macroeconomic Variables Impact the Indian Stock Market?

2016 ◽  
Vol 5 (3) ◽  
Author(s):  
Khalid Ul Islam ◽  
Mohsina Habib
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Stock Returns ◽  
Causal Relationship ◽  
Granger Causality ◽  
Oil Prices ◽  
Granger Causality Test ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Indian Stock Market

This paper is intended to study the impact of various macroeconomic variables on Indian stock market. Based on the Arbitrage Pricing Theory (APT) propounded by Ross in 1976 and various other studies, a number of macroeconomic variables including, inflation, industrial production, exchange rate, money supply, interest rate, and oil price have been identified to have a significant impact on the stock market. We have applied the multivariate extension of the classical linear regression model computed on Ordinary Least Squares method and Granger Causality test to re-establish the relationship between macroeconomic variables and stock returns over a period of 10 years from 2005 to 2015 using monthly observations. The results of this study show that only exchange rate has a significant negative impact on stock returns. The other macroeconomic variables are not significantly affecting stock returns, however, their impact is in accordance with the economic theory. The Granger Causality test reveals absence of any causal relationship between stock returns and macroeconomic variables, except in case of oil prices, where we find a unidirectional causal relationship running from stock returns to oil prices. However, the Granger Causality results should not be taken in the conventional meaning of causality, but results merely identifying precedence.

scholarly journals Nexus between Stock Market Returns and Economic Variables: Evidence

2017 ◽  
Vol 4 (01) ◽  
Author(s):  
Vanitha Chawla ◽  
Shweta .
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Market Returns ◽  
Causality Test ◽  
Stock Market Returns ◽  
Macroeconomic Variables ◽  
Indian Stock Market ◽  
The Impact

The paper examines the impact of selected macroeconomic variables on the Indian stock market. The macroeconomic variables used in the study are interest rate, exchange rate, index of industrial production (IIP) and gold price. BSE Sensex is used as proxy for Indian stock market. We have used the monthly data for all the variables from January 2001 to December 2016. Regression analysis and Granger Causality test is used to establish the relationship between the stock market and macroeconomic variables. The results show significant impact of only exchange rate on stock returns. All the other variables have shown insignificant impact on the stock market returns. The results of Granger causality test show unidirectional relationship between exchange rate and stock prices and bi-directional relation between IIP and SENSEX.

scholarly journals Do Macroeconomic Variables Affect Stock Market Performance? A Case Study of DSEX and DS30 Index of Dhaka Stock Exchange

2019 ◽  
Vol 9 (3) ◽  
pp. 182
Author(s):  
Emran Hasan ◽  
Shahanawaz Sharif
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Market ◽  
Inflation Rate ◽  
Market Performance ◽  
Cointegration Analysis ◽  
Causality Test ◽  
Treasury Bill ◽  
Macroeconomic Variables ◽  
Stock Market Performance

Stock market performance– being the linchpin of an economy, requires variations in policies concerning macroeconomic variables. Keeping this in notion, this research assays the empirical association between stock market performance and a few selected macroeconomic variables namely interest rate, exchange rate, inflation rate, and 91-days Treasury bill rate using monthly data ranging from January 2013 to October 2018. Employing Johansen Cointegration analysis, the results of the study suggest that exchange rate and treasury bill rate are positive whereas interest rate and inflation rate are negatively associated with better stock market performance. Granger causality test implies bidirectional causality – between the interest rate and DS30 as well as DSEX while unidirectional causality is evident for both the indices which are running from interest rate, inflation and exchange rate to stock market performance. Formulation and implementation of prudent policies regarding the studied macroeconomic variables can lead to a healthy stock market outcome.

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