Relationship between Stock Market and Macroeconomics Variables

Abstract

Purpose – The purpose of this paper is to explore the extent to which macroeconomics variables effect the stock price fluctuation in Malaysia.Design/methodology/approach – This paper employs time series data as it use 60 months of observations of each macroeconomics variables. Findings – The result suggest that money supply (M3) and exchange rate seem to be suitable targets in order to stabilize the stock prices and to encourage more capital flows into the market. As for consumer price index (CPI) and Industrial performance index (IPI), the paper finds that these variables do not give effect to the stock prices.Research limitations/implications – The result of this study are limited to the 2008 stock market period until the beginning of the year 2013 for the stock prices in Malaysia.Practical implications – Originality/value – The paper adopts the latest time series econometrics technique to test for regression. And it is among the earliest attempts to investigate the relationship between the macroeconomics variables and the stock prices changes on the stock market in Malaysia.