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Macroeconomic Factors and Bank and Finance Stock Prices: The Australian Experience

Author

Listed:
  • Paul, Satya
  • Mallik, Girijasankar

    (University of Western Sydney, Sydney, NSW)

Abstract

This 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.

Suggested Citation

  • Paul, Satya & Mallik, Girijasankar, 2003. "Macroeconomic Factors and Bank and Finance Stock Prices: The Australian Experience," Economic Analysis and Policy, Elsevier, vol. 33(1), pages 23-30, March.
    • Handle: RePEc:eee:ecanpo:v:33:y:2003:i:1:p:23-30
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    Citations

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    Cited by:

    1. Vadim Ye. Zyamalov, 2017. "Comparison of the Predictive Ability of Single and Multi-Regime Models of Stock Market Dynamics," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 64-75, April.
    2. Konrad Farrugia & Janice Duca & Peter J. Baldacchino & Simon Grima, 2021. "The Relationship between Inflation and Stock Returns in a Small Island State: An Analysis," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 11(2), pages 51-78.
    3. Prabhas Kumar Rath, 2023. "Nexus Between Indian Financial Markets and Macro-economic Shocks: A VAR Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 131-164, March.
    4. Husam RJOUB & Irfan CIVCIR & Nil Gunsel RESATOGLU, 2017. "Micro and Macroeconomic Determinants of Stock Prices: The Case of Turkish Banking Sector," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 150-166, March.
    5. Tran, Thi Bich Ngoc, 2017. "Speculative bubbles in emerging stock markets and macroeconomic factors: A new empirical evidence for Asia and Latin America," Research in International Business and Finance, Elsevier, vol. 42(C), pages 454-467.

    More about this item

    Keywords

    Bank; Banking; Finance; Macroeconomics; Stock Price; Stocks;
    All these keywords.

    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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