Macroeconomic Uncertainty and Stock Market Uncertainty: Some Further Evidence From Pakistan

Tariq Aziz (), Jahanzeb Marwat () and Sheraz Mustafa ()
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Jahanzeb Marwat: Sukkur IBA University, Sukkur, Pakistan
Sheraz Mustafa: Sukkur IBA University, Sukkur, Pakistan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2021, vol. 24, issue 02, 1-15

Abstract: The paper provides an updated evidence of the linkage between stock market and macroeconomic factors in Pakistan. The sample period is from January 2011 to November 2017. Macroeconomic variables used are money supply, exchange rate, treasury bill rate, inflation and industrial production. Generalized autoregressive conditional heteroscedasticity (GARCH) models have been used to examine the impact of macroeconomic factors on stock market return and stock market volatility. Findings suggest that macroeconomic factors have an impact on stock market volatility. The fluctuations in inflation and money supply negatively influence the volatility of stock market returns. In contrast, industrial production positively affects the fluctuations of stock market returns. The findings are important for shareholders, investors, regulatory authorities and policymakers.

Keywords: Stock market; macroeconomic variables; conditional volatility; GARCH (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S0219091521500144

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