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Stock Returns and the Macroeconomic Environment Prior to the Asian Crisis in Selected Southeast Asian Countries

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  • KANOKWAN CHANCHAROENCHAI
  • SEL DIBOOG¬LU
  • IKE MATHUR

Abstract

This paper investigates the relationship between domestic macroeconomic variables and stock excess returns to evaluate the effects of macroeconomic variables on excess returns and assess market efficiency in the Southeast Asian economies prior to the 1997 Asian crisis. Based on various tests, monthly stock excess returns are best specified by autoregressive conditional heteroskedasticity-type models. The null hypothesis of a martingale process is rejected, and some macroeconomic variables are identified that seem to have a certain predictive power for excess returns. Moreover, it appears that Asian monetary authorities seem to have had a credibility problem in keeping inflation within a target range. The lack of credibility and transparency may have contributed to the 1997 crisis.

Suggested Citation

  • Kanokwan Chancharoenchai & Sel Diboog¬Lu & Ike Mathur, 2005. "Stock Returns and the Macroeconomic Environment Prior to the Asian Crisis in Selected Southeast Asian Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(4), pages 38-56, August.
    • Handle: RePEc:mes:emfitr:v:41:y:2005:i:4:p:38-56
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    Citations

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    Cited by:

    1. Naushad Alam, 2017. "Analysis of the impact of select macroeconomic variables on the Indian Stock Market: A heteroscedastic cointegration approach," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(1), pages 119-127, March.
    2. Guneratne Wickremasinghe, 2011. "The Sri Lankan stock market and the macroeconomy: an empirical investigation," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 28(3), pages 179-195, August.
    3. Evrensel, Ayse Y. & Kutan, Ali M., 2008. "Impact of IMF-related news on capital markets: Further evidence from bond spreads in Indonesia and Korea," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 147-160, April.
    4. Kutan, Ali M. & Muradoglu, Gulnur & Sudjana, Brasukra G., 2012. "IMF programs, financial and real sector performance, and the Asian crisis," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 164-182.
    5. Alam, Naushad, 2017. "Analysis of the impact of select macroeconomic variables on the Indian stock market: A heteroscedastic cointegration approach," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 13(1).
    6. Kenc, Turalay & Dibooglu, Sel, 2010. "The 2007-2009 financial crisis, global imbalances and capital flows: Implications for reform," Economic Systems, Elsevier, vol. 34(1), pages 3-21, March.
    7. Miras, Hassan & Masih, Mansur, 2017. "Stock returns and macroeconomic factors in an emerging economy: Malaysian evidence," MPRA Paper 101229, University Library of Munich, Germany.

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