Multivariate Causality between Stock price index and Macro variables: ‎evidence from Canadian stock market

Malika Neifar

MPRA Paper from University Library of Munich, Germany

Abstract: Currently, the investor considers monetary indicators a vital factor when ‎making any investment in equity prices. This research aim to find the long-‎run relationship between stock returns (DLSP) of Canada and monetary ‎indicators as the exchange rate (LEXC), the interest rate (LINT), and ‎inflation rate (INF). We consider T=232 observations for each variable from ‎January 1999 to April 2018. From the Johansen cointegration approaches, ‎there is no long-run association between stock prices and monetary ‎indicators. Results of the Granger causality tests have demonstrated the ‎unidirectional causation from the stock return to Inflation rate and to ‎Exchange rate growth. While Results of Toda and Yamamoto Wald tests ‎have demonstrated a bidirectional causal relation between stock price and ‎consumer price index and a unidirectional causation from stock price to the ‎interest rate and to the exchange rate growth. Based on IRFs, Inflation rate ‎is shown to be inversely related to stock returns. Thus, it is concluded that ‎the predictability of Canadian stock return relies only on the variations of ‎inflation rate.‎

Keywords: Canadian stock price index; macroeconomic variables; Granger non causality; Johansen ‎cointegration; Toda and Yamamoto non causality wald test, Impulse–response functions ‎‎(IRFs).‎ (search for similar items in EconPapers)
JEL-codes: C32 E44 G14 (search for similar items in EconPapers)
Date: 2021-01-30
New Economics Papers: this item is included in nep-fmk and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/105715/1/MPRA_paper_105715.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:105715

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().