Dynamic Relations between Macroeconomic Variables and Stock Prices
Journal of Economics, Management and Trade · pp. 1–12 · Published 16 Feb 2016
10.9734/BJEMT/2016/22524Abstract
This study has examined the dynamic relationship between certain macroeconomic variables and stock prices in the UK and South Africa. Using the Johansen co-integration technique based on vector error correction model (VECM), the study finds one co-integrating vector for the UK data suggesting that macroeconomic variables have long run effect on stock prices, with the stock prices being positively related to industrial production but negatively related to both long term and inflation rates. The inflation rate was found to respond the most to shocks for the UK. The UK inflation rate can serve as a signal for the condition and state of the economy. No long run relationship was however found for the South Africa. The Granger causality test shows changes in industrial production in South Africa are better explained by both its past values and past stock market performance.
Cited by 3
Ajeigbe Kola Benson, H. Thomas, G. Fortune · International Journal of Research In Business and Social Science · 2022
Thomas Sumarsan Goh, Henry Henry, Nagian Toni · International Journal of Communication and Society · 2022
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