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

Within the framework of a standard discounted value model we examine whether a number of macroeconomic variables influence stock prices in the US and Japan. A cointegration analysis is applied in order to model the long term relationship between industrial production, the consumer price index, money supply, long term interest rates and stock prices in the US and Japan. For the US we find the data are consistent with a single cointegrating vector, where stock prices are positively related to industrial production and negatively related to both the consumer price index and a long term interest rate. We also find an insignificant (although positive) relationship between US stock prices and the money supply. However, for the Japanese data we find two cointegrating vectors. We find for one vector that stock prices are influenced positively by industrial production and negatively by the money supply. For the second cointegrating vector we find industrial production to be negatively influenced by the consumer price index and a long term interest rate. These contrasting results may be due to the slump in the Japanese economy during the 1990s and consequent liquidity trap.

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Can Macroeconomic Variables Explain Long Term Stock Market Movements? A Comparison of the US and Japan

Within the framework of a standard discounted value model, we examine whether a number of macroeconomic variables influence stock prices in the US and Japan. A cointegration analysis is applied in order to model the long-term relationship between industrial production, the consumer price index, money supply, long-term interest rates and stock prices in the US and Japan. For the US, we find the data are consistent with a single cointegrating vector, where stock prices are positively related to industrial production and negatively related to both the consumer price index and the long-term interest rate. We also find an insignificant (although positive) relationship between the US stock prices and the money supply. However, for the Japanese data, we find two cointegrating vectors. We find for one vector that stock prices are influenced positively by industrial production and negatively by the money supply. For the second cointegrating vector, we find industrial production to be negatively influenced by the c...

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Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan

Wavelet analysis of stock returns and aggregate economic activity

Co-movement of international crude oil price and Indian stock market: Evidences from nonlinear cointegration tests

Stock prices and domestic and international macroeconomic activity: a cointegration approach

Stock prices and the dividend discount model: did their relation break down in the 1990s?

The purpose of this article is to employ several nonnested procedures to empirically test the proposition put forward by Mankiw and Summers that consumption rather than income is the appropriate scale measure in the money demand function. Real income, real disposable income, consumer spending on nondurables, personal consumption expenditures, and total private spending are tested as candidates for the scale variable. Tests are carried out for both M1 and M2 concepts of money. The results based on both M1 and M2 support the Mankiw–Summers position, but the results based on M2 are not as strong as those based on M1. Implications for fiscal and monetary policies are discussed.

The Appropriate Scale Variable in the U.S. Money Demand: An Application of Nonnested Tests of Consumption Versus Income Measures

In this paper nonnested tests are used to contrast the performance of the capital asset pricing (CAPM) and consumption capital asset pricing (CCAPM) theories in describing the U.S. stock market. The procedures employed include the N-test, the NT-test, the W-test, the J-test, and the Encompassing test. The tests are carried out using data on firms as well as portfolios based on beta, capitalization, and Standard Industrial Classification codes. The findings indicate that although during 1973–82 the CAPM dominates the CCAPM, during 1978–87 the results are mixed, and during 1983–92 the CCAPM dominates. The finding in favor of the CCAPM in 1983–92 conflicts with much of the existing literature, which favors the CAPM.

Alireza Nasseh

Papers

Stock prices and domestic and international macroeconomic activity: a cointegration approach

Stock prices and the dividend discount model: did their relation break down in the 1990s?

The Appropriate Scale Variable in the U.S. Money Demand: An Application of Nonnested Tests of Consumption Versus Income Measures

Nonnested procedures in econometric tests of asset pricing theories

The UK's demand for money and the choice of the appropriate scale variable and interest rate: an application of non–nested tests