Predictive Content of Output and Inflation For Stock Returns and Volatility: Evidence from Selected Asian Countries
AbstractThis study examines the impact of inflation and output growth on stock market returns and volatility in selected Asian countries, namely India, Japan, Korea, Malaysia and Philippines. By using monthly data from 1991 to 2004 and by employing GARCH (1, 1) model, it is found that macroeconomic volatility, which is measured by movement in inflation and output growth, have a weak predictive power for stock market returns and volatility in these countries. The movements of the inflation rate have significant impact to the stock market returns, either positive or negative depending on the inflation rates and their fluctuation in that country. While output growth movements have significant effect to stock market volatility, countries with relatively higher output volatility is associated with higher conditional volatility of stock returns, which is positive effect but is negative for countries which have relatively lower output volatility.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14114.
Date of creation: 16 Jan 2009
Date of revision:
Stock returns; volatility; output; inflation; Asian countries;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-22 (All new papers)
- NEP-MAC-2009-03-22 (Macroeconomics)
- NEP-SEA-2009-03-22 (South East Asia)
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