Macroeconomic Factors and Bank and Finance Stock Prices: The Australian Experience
AbstractThis paper investigates the relationship between macroeconomic factors and stock prices in the banking and finance sector in Australia using quarterly data for the period 1980Q1-99Q1. The research methodology consists of conducting cointegration tests and estimating an error correction model for examining the long run relationship between bank and finance stock prices and macroeconomic variables such as inflation, interest rate and real GDP growth. The study reveals that the bank and finance stock prices are cointegrated with all three macroeconomic variables. The interest rate has a negative effect, whereas GDP growth has a positive effect on stock prices. Inflation has no significant effect on stock prices, which supports Fama's proxy hypothesis.
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Bibliographic InfoArticle provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).
Volume (Year): 33 (2003)
Issue (Month): 1 (March)
Bank; Banking; Finance; Macroeconomics; Stock Price; Stocks;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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