Do Macroeconomic Factors are interlinked with Stock Markets in Asian Emerging Economies. A Panel Data Approach

Abstract

The study of macroeconomic forces and the stock market is a dynamic field in finance because investors’ interest changes due to their preference for high returns over lower returns and risk-averse investors are always desirous of mitigating risk across emerging economies are playing a pivotal role in the global investment communities. Therefore, this study focuses on various economic indicators that robust business growth. The primary purpose of this study is to evaluate macroeconomic forces’ linkages with stock markets by applying a panel data analysis. Data was taken for the period 1999 to 2019 for Asian stock markets. Panel data econometric techniques have been used to analyze the data of the Asian equity market. Studies have taken stock market data from five emerging economies, i.e., Pakistan, China, India, Philippines, and Japan. Panel data results confirm that gross domestic product, interest rates, exchange rate, and money supply positively impact market return. However, correlation results reveal that market return strongly relates to foreign direct investment, interest rate, and money supply. The co-integration result also reveals the presence of a long-run relationship. Further results show that GDP has a leading behavior with market return, and market return has a leading behavior with GDP, CPI, ER, and IPI.