Relationship between Macroeconomic Variables and Stock Market Indices: Cointegration Evidence from Stock Exchange of Singapore's All-S Sector Indices

Ramin Cooper Maysami, Lee Chuin Howe, Mohamad Atkin Rahmat

Abstract


The relationship between macroeconomic variables and stock market returns is, by now, well-documented in the literature. However, a void in the literature relates to examining the cointegration between macroeconomic variables and stock market's sector indices rather than the composite index. Thus in this paper we examine the long-term equilibrium relationships between selected macroeconomic variables and the Singapore stock market index (STl), as well as with various Singapore Exchange Sector indices-the finance index, the property index, and the hotel index. The study concludes that the Singapore's stock market and the property index form co integrating relationship with changes in the short and long-term interest rates, industrial production, price levels, exchange rate and money supply. Implications of the study and suggestions for future research are provided.


ABSTRAK
Hubungan antara pembolehubah makroekonomi dengan pulangan pasaran saham, sehing g a kini, sudah banyak dihasilkan dalam karya lepas. Bagaimanapun, masih terdapat kekosongan dalam literatur ini mengenai hubung an kointegrasi antara pembolehubah ekonomi makro dengan indeks sektoral dalam pasaran saham berbanding kajian berkatian dengan indeks komposit. Justeru itu, dalam kertas ini, kami mengkaji hubungan keseimbangan jangka panjang antara beberapa pembolehubah ekonomi makro yang terpilih, dengan indeks pasaran saham Singapura (STl) serta beberapa indeks sektoral - indeks kewangan, indeks hartanah, dan indeks perhotelan. Kajian ini mendapati bahawa pasaran saham Singapura dan indeks hartanah menunjukkan hubungan kointegrasi dengan perubahan kadar bunga jangka pendek dan jangka panjang juga dengan pengeluaran industri, paras harga, kadar tukaran mata wang dan penawaran wang. Implikasi kajian dan cadangan kajian untuk masa depan dikemukakan.


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