FACT SHEET Group# 05

Sr. 1. Title Stock Market Returns and Inflation: Evidence from Other Countries Investigating the Relationship between Stock Market Returns and Macroeconomic Variables: Evidence from Developed and Emerging Markets. Economic variables and stock market returns: evidence from the Athens stock exchange. Author N. Bulent Gultekin Year 1983 Journal The Journal of Finance Objective To find out the relationship between the inflation and stock return in 26 countries Variables Inflation Statistical tool Correlation Finding and conclusion there is lack of positive relationship between inflation and stock return in mostly countries consistently Significant Casual relationship found between macroeconomics variable and stock return in developed and emerging market and emerging markets are more esteblished than developed markets. Inflation, trading volume and money supply short run and long run equilibrium relationship with stock return while exchange rates has no relationship with stock return in Athena Stock Exchange. It is found that stock returns are related positively to inflation and money growth and negatively to budget

2.

Mohamed Khaled AlJafari, Rashed Mohammed Salameh and Mohammad Rida Habbash

2011

International Research Journal of Finance and Economics

To exemine the relationship between the macroeconomics variable and stock return in developing and emerging markets.

Real economic activity, inflation, interest rate, money supply and exchange rate Inflation, trading volume, money supply, exchange rates and ASE General Index money growth, budget deficits, inflation and

Granger Causality Test, cointegration tests

3.

Theophano Patra & Sunil Poshakwale

2006

Applied Financial Economics

4.

Macroeconometrics of Stock Price Dewan A. Fluctuations. Abdullah and Steven C. Hay worth

1993

Quarterly Journal of Business and Economics

To examines the short run dynamic adjustments and the long run equilibrium relationships between macroeconomic variables, trading volume and stock returns in the emerging Greek stock market Identify a set of macroeconomic variables that are Granger causal to stock prices and explain their contribution.

Autocorrelation, ADF statistics and ARCH test

Granger causality tests and Sims' innovation accounting

interest rate 5. The effect of Macro-economic factors on Stock Return volatility in the Nairobi Stock Exchange, Kenya Impact of Macroeconomic indicators on Vietnamese Stock Prices. Tobias Olweny and Kennedy Omondi 2011 Economics and Finance Review The study focused on the effect of foreign exchange rate, interest rate and inflation rate fluctuation on stock return volatility at the Nairobi Securities Exchange. To investigate the effects of macroeconomic indicators of Vietnam and USA on Vietnamese stock prices. Foreign Exchange rate, interest rate and inflation interest rate and industrial production

6.

Khaled Hussainey, Le Khanh Ngoc

2009

Journal of Risk Finance Volume

7.

8.

The relationship between stock returns and inflation: new evidence from wavelet analysis. Inflation, Stock Returns, and Real Activity in Turkey.

Sangbae Kim, Francis In

2005

Journal of Empirical Finance

To find out the impact of inflation on stock prices in short run and long run

Inflation

Ramazan Sari, Ugur Soytas

2005

The Empirical Economics Letters

9.

Real Activity, Inflation, Stock Returns, and Monetary Policy.

Kwangwoo Park, Ronald A. Ratti

2000

The Financial Review

To investigate the relationship between inflation, stock returns, and real activity in Turkey. To find out the relationship of monetary policy, real activity and inflation with stock prices.

Inflation and real activity

deficits, trade deficits and interest rates. EGARCH, The results showed TGARCH evidence that Foreign exchange rate, Interest rate and Inflation rate, affect stock return volatility. Nasseh and Domestic production Strauss (2000) sector, money market and stock return has statistically significant association in Veit Nam and US macroeconomics variable also had significant impact on Veit Nam economy. Wavelet analysis inflation and stock return , Correlation has positive relationship matrix, in short term while Regressions negative relationship exist in long run between them. Unit Root Test, There is negative Correlation relationship between inflation and stock returns in Turkey. Vector auto regression model Monetary policy has very important role in explaining the negative relation between inflation and stock

Real activity, inflation and interest rate.

10. Risk factors in stock returns of Canadian oil and gas companies.

Perry Sadorsky

2001

Energy Economics

To estimate the expected returns of Canadian oil and gas industry stock prices.

exchange rates, crude oil prices, inflation and interest rates

Ordinary least squares model, Regression diagnostic tests

11. Oil price shocks and emerging stock markets: a generalized VAR approach

Aktham Maghyereh

2004

12. An Empirical Analysis of Expected Stock Price Movements. 13. Taxation and the Effects of Inflation on the Real Capital Stock in an Open Economy.

DOUGLAS K. PEARCE

1984

International Journal of Applied Econometrics and Quantitative Studies Journal of Money, Credit and Banking International Economic Review

To examines the dynamic linkages between crude oil price shocks and stock market returns in 22 emerging economies.

Oil prices shocks

VAR model

returns. Oil prices have positive relationship with oil & gas stock return while exchange rate has negative relationship. This suggest that oil & gas stock can not be use for hedging inflation Oil prices shocks has no significant impact on stock prices in emerging markets.

To find out the key economics variable effecting the stock prices. To find out the impact of inflation on international capital stock market.

Inflation, Growth rate

t-statistic

David G. Hartman

1979

Interest rate, Inflation, Taxation

Correlation matrix.

14. Inflation, Asset Prices, and the Term Structure of Interest Rates in Monetary Economies.

Gurdip S. Bakshi and Zhiwu Chen

1996

The Review of To find the relationship of Financial Studies inflation, real and nominal interest rate and stock prices.

the price level, inflation, asset prices, and the real and nominal

Correlation

There is an adverse relationship between inflation and stock returns. Inflation in the inflating country has positive relationship with stock returns but negative relationship with the prices of other country capital stock. inflation has negative correlation while money growth has positive correlation with stock returns

15. Inflation, Output and Stock Prices: Evidence from Latin America

Bahram Adrangi, Arjun Chatrath and Todd M. Shank

1999

Managerial and Decision Economics

The present study investigates this relationship for the developing Market of Peru and Chil.

interest rates Inflation, interest rate and money supply

Unit root test

16. International evidence on the stock market and aggregate economic activity

Yin-Wong Cheung and Lilian K. Ng

1998

Journal of Empirical Finance

To find empirical evidence of long run comovements between five national stock market indexes and measures of aggregate real activity including the real oil price, real consumption, real money, and real output

real oil price, real consumption , real money, and real output

Johansen cointegration technique,

17. Inflationary and the Capital Stock.

Mark crosby, Glenn otto

2000

Journal of Money, Credit, and Banking

There is a long literature examining the theoretical relationship be-tween the rate of inflation and the size of the capital stock in an economy

Infaltion

VAR model

The negative relationship between the real stock returns and inflation rate persists even after the negative relationship Between inflation and real activity is purged. Therefore, real stock returns may be adversely affected by inflation. we find that real returns on stock indexes are generally related to deviations from the empirical long run relationship and to changes in macro variables. Adding error correction terms to the model substantially improves the explanatory power for stock returns. Moreover, for countries where a significant effect is found, the long-run coefficient estimate is typically positive. Overall our empirical results support the view that the long-run level of the capital stock is invariant to permanent changes in

18. The Spline-GARCH Model for LowFrequency Volatility and Its Global Macroeconomic Causes

Robert F. Engle and Jose Gonzalo Rangel

2008

The Society for This paper proposes Financial Studies modeling equity volatilities as a combination of macroeconomic effects and time series dynamics.

GDP, inflation and short-term interest rates

Unit GARCH.

19. Stock Returns, Real Activity, Inflation, and Money

Eugene F. Fama

2012

The american Economic Review

This paper attempts to explain these anomalous stock return-inflation relations.

Inflation and capital expenditure

Regression

20. Macroeconomic Factors Do Influence Aggregate Stock Returns

Mark J. Flannery and Aris A. Protopapadak is

2012

The Society for The impact of real Financial Studies macroeconomic variables on aggregate equity returns has been difficult to establish, perhaps because their effects are neither linear nor time invariant

CPI, PPI, and a Monetary Aggregate

GARCH model

21. Stock returns and inflation. Momic Influences on the Stock Mark Macroeconomic Influences

Gautam Kaul

1987

Journal of Financial Economics

This paper hypothesizes that the relation between stock returns and inflation is caused by the equilibrium process in the monetary sector.

Inflation and money supply

Regression model

the inflation rate. conclude that the results are robust for all variables except volatility of inflation and real GDP growth, for which statistical significance is sensitive to influential observations. There is consistent evidence of negative relations between inflation and real activity which we interpret in the context of money demand theory and the quantity theory of money. In this article we seek to identify macroeconomic risk factor candidates by examining simultaneously the impact of macroeconomic announcements on level and conditional volatility of daily equity returns. from the 1930s reveals significantly different stock return-inflation relations as a consequence of procyclical movements in

on the St

22. A vector error correction model of the Singapore stock market.

Ramin Cooper Maysam and Tiong Sim Koh

2000

International Review of Economics and Finance

23. Oil price shocks and stock market activity

Perry Sadorsky

1999 Energy Economics

To examines the long-term equilibrium relationships between the Singapore stock index and selected macroeconomic variables, as well as among stock indices of Singapore, Japan, and the United States. to study increases in oil prices are often indicative of inflationary pressure in the economy which in turn could indicate the future of interest rates and investments of all types.

money vector error supply, short- correction and longmodels term interest rates, and exchange rates.

money, prices, and stock returns. Specifically, stock returns either have no relation or are positively related to the inflation variables. the Singapore stock market is significantly and positively coo integrated with stock markets of Japan and the United States.

Oil price,interst rate and industrial production

vector autoregression

changes in oil prices impact economic activity but, changes in economic activity have little impact on oil prices. Impulse response functions show that oil price movements are important in explaining movements in stock returns. The estimated results suggest that positive shocks to oil prices depress real stock returns while shocks to real stock returns have positive impacts on

24. Long-run and shortrun relationship between macroeconomic variables and stock prices in pakistan.

Nadeem Sohail and Zakir Hussain

2009

Pakistan Economic and Social Review

To examine short term and long term relation between Lahore stock exchange and macro economic variable.

25. Macroeconomic factors and equity prices: an empirical investigation by using ARDL approach

Arshad Hasan and Zafar Mueen Nasir

2008

The Pakistan Development Review

To find out the long term causal relationship between Pakistani capital market and macroeconomic variable using monetary data

consumer price index, real effective exchange rate, three month treasury bills rate, industrial production index, money supply. Industrial production index, Broad money, Oil prices, Foreign exchange rate, inflation and interest rate.

Correlation, cointegration and unit root test.

interest rates and industrial production. The increase in industrial production can play significance positive role on development of capital market in Pakistan.

ADF Test and Phillips-perron test

ADRL long run coefficients reveals that industrial production, oil prices and inflation are statistically insignificant in determining equity prices in long run. Interest rates, exchange rates and money supply have significant long run effect on equity prices and ADRL short run approach also confirms it.