can anybody suggest a best seminal works on the relationship between macroeconomic variables and stock price?
thanks in advance
Hi,
The roles of microeconomics on asset prices is postulated in APT model.
See the following article:
The Arbitrage Theory of Capital Asset Pricing
https://www.top1000funds.com/.../The-Arbitrage-Theory-of-Capital-Asset-Pricing.pdf
by SA ROSS - 1976 - Cited by 7814 -
The purpose of this paper is to examine rigorously the arbitrage model of capital asset pricing developed in Ross [13, 141. The arbitrage model was proposed as an alternative to the mean variance capital asset pricing model, introduced by Sharpe, Lintner, and Treynor, that has become the major analytic tool for explaining ...
Impact of Liquidity and Volatility on Stock Market Returns in Nigeria by John Okey Onoh.
Hi,
It may be worth checking also country-specific research (in addition to the APT suggested in the first response). This is due to the fact that influence will differ across the world. You can have a look at the following for example:
http://onlinelibrary.wiley.com/doi/10.111/j.1475-6803.1995.tb00563.x/full
Article Macroeconomic Variables and Stock Prices in a Small Open Eco...
Best regards,
Veneta
Read the following articles:
Gjerdr, Oystein and Frode Saettem (1999), Causal Relation among Stock Returns and Macroeconomic Variables in a Small, Open Economy, Journal of International Financial markets, Institutions and Money, Vol. 9, pp. 61-74.
Doong, S.-Ch., Yang, Sh.-Y., Wang, A., (2005) , The dynamic relationship and pricing of stocks and exchange rates: Empirical evidence from Asian emerging markets, Journal of American Academy of Business, Cambridge, Vol.7, No1, pp.118-23.
The link below is an interesting study that looked at 30 years worth of data. The purpose was to see whether movements in the stock market are correlated with the economy. They found a relationship between the economy and bonds, but not stocks.
Link: https://www.aier.org/research/new-insight-investors-how-financial-markets-interact-economy
Dear Mr. Potharia,
Your question first needs to be justified in the sense that whether you are studying the causality between macroeconomic variables like change in unemployment and stock price or between change in stock price or stock market returns and unemployment rate. We have studied the relationship between stock market returns and interest cost which is a field integration between interest rate and its incidence (public economics) in terms of interest cost in Mallick (2011) for e.g. and in research done for the Planning Commission of India (Mallick, Sarkar & Roy (2003)) for e.g. and found it to be cointegrated with interest cost over various industrial sectors differently thereby reflecting the incompleteness existing in Indian Stock Markets (Polemarchakis (1990), Mallick (1993) for e.g.) due to technological dissimilarities across sectors for e.g. These papers are listed on www.researchgate.net/profiles/Soumitra_Mallick and are studies on the market microstructure field (Mallick (1993, 2012)) but they do analyse the mathematical-statistical cointegration of stock markets and Economics in general and Macroeconomics in particular in line with Tobin or Hicks but taking into account the P vs. NP problem (Mallick, Hamburger & Mallick (2016)) which is the Millenium Prize problem plaguing Quantitative Finance and Econophysics with our implicit "jump quantum conductance" solution (Mallick et. al. (2016, 2017)). This is a problem which the IMF always tries to solve and I had also written to them and who knows with all yours' good wishes I might become the Head of IMF someday from SAARC. But I hope I have been able to solve some of your problems in this regard.
Soumitra K. Mallick
for Soumitra K. Mallick, Nick Hamburger, Sandipan Mallick
Macroeconomic variables are one type among all variables impacting stock prices. Reducing relationship to a few and ignoring all the other ones is wrong from many angles.
In order to verify the conjecture that there is relationship, the best way is
to make an investment with real money, and to reduce the time to see it, I recommend taking a leverage, for example 100:1.
Arbitrage is for whom, by the way? I see you have never seen any financial instrument chart. This ridiculous thread would be lying at the bottom of any trading forum. Please do not make RG so low.
There are various contributions by RP Pradhan,few are given below, hope this would help you out.
1)Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries
2) The dynamics of economic growth, oil prices, stock market depth, and other macroeconomic variables: Evidence from the G-20 countries