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Macroeconomic Factors and Share Returns: An Analysis Using Emerging Market Data

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  • Fifield, S G M
  • Power, D M
  • Sinclair, C D

Abstract

This paper investigates the extent to which global and local economic factors explain returns in emerging stock markets (ESMs). The economic factors are determined using principal components analysis. The results suggest that the local economic variables included in this study can be summarized by GDP, inflation, money and interest rates, while the selected global variables can be sufficiently characterized by world industrial production and world inflation. These components are then used as inputs into a regression analysis in order to explain the index returns of 13 ESMs over the period 1987-96. The analysis indicates that while world factors are significant in explaining ESM returns, local factors may also play a crucial role. Copyright @ 2002 by John Wiley & Sons, Ltd. All rights reserved.

Suggested Citation

  • Fifield, S G M & Power, D M & Sinclair, C D, 2002. "Macroeconomic Factors and Share Returns: An Analysis Using Emerging Market Data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 51-62, January.
  • Handle: RePEc:ijf:ijfiec:v:7:y:2002:i:1:p:51-62
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    References listed on IDEAS

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    1. Demetriades, Panicos O. & Luintel, Kul B., 2001. "Financial restraints in the South Korean miracle," Journal of Development Economics, Elsevier, pages 459-479.
    2. Demetriades, Panicos O. & P. Devereux, Michael & Luintel, Kul B., 1998. "Productivity and financial sector policies: Evidence from South East Asia," Journal of Economic Behavior & Organization, Elsevier, vol. 35(1), pages 61-82, March.
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    Cited by:

    1. Kuang-Liang Chang & Ming-Hui Yen, 2014. "The magnitude and significance of macroeconomic variables in explaining regional housing fluctuations," Economics Bulletin, AccessEcon, vol. 34(2), pages 828-841.
    2. Asgharian, Hossein & Hess, Wolfgang & Liu, Lu, 2013. "A spatial analysis of international stock market linkages," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4738-4754.
    3. Liow, Kim Hiang & Webb, James R., 2009. "Common factors in international securitized real estate markets," Review of Financial Economics, Elsevier, vol. 18(2), pages 80-89, April.
    4. Elizabeth Ann Maharaj & Pierpaolo D’Urso & Don Galagedera, 2010. "Wavelet-based Fuzzy Clustering of Time Series," Journal of Classification, Springer;The Classification Society, vol. 27(2), pages 231-275, September.
    5. Lina Escobar Rangel & François Lévêque, 2012. "Revisiting the cost escalation curse of nuclear power: New lessons from the French experience," Working Papers hal-00780566, HAL.
    6. Papadamou, Stephanos & Sidiropoulos, Moïse & Spyromitros, Eleftherios, 2017. "Interest rate dynamic effect on stock returns and central bank transparency: Evidence from emerging markets," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 951-962.
    7. Gupta, Rakesh & Yuan, Tian & Roca, Eduardo, 2016. "Linkages between the ADR market and home country macroeconomic fundamentals: Evidence in the context of the BRICs," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 230-239.
    8. repec:kap:rqfnac:v:50:y:2018:i:1:d:10.1007_s11156-017-0622-4 is not listed on IDEAS
    9. Pyemo Afego, 2012. "Weak Form Efficiency of the Nigerian Stock Market: An Empirical Analysis (1984 – 2009)," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 340-347.
    10. repec:exl:2manag:v:17:y:2016:i:1:p:7-20 is not listed on IDEAS
    11. Camilo Serrano & Martin Hoesli, 2012. "Fractional Cointegration Analysis of Securitized Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 319-338, April.
    12. Konstantinos Tolikas, 2011. "The rare event risk in African emerging stock markets," Managerial Finance, Emerald Group Publishing, vol. 37(3), pages 275-294, February.
    13. Sousa, Ricardo M. & Vivian, Andrew & Wohar, Mark E., 2016. "Predicting asset returns in the BRICS: The role of macroeconomic and fundamental predictors," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 122-143.
    14. Lina Escobar Rangel and Francois Leveque, 2015. "Revisiting the Cost Escalation Curse of Nuclear Power: New Lessons from the French Experience," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    15. Asmy, Mohamed & Rohilina, Wisam & Hassama, Aris & Fouad, Md., 2009. "Effects of Macroeconomic Variables on Stock Prices in Malaysia: An Approach of Error Correction Model," MPRA Paper 20970, University Library of Munich, Germany.
    16. Mónica Fuentes & Sergio Godoy, 2005. "Sovereign Spread in Emerging Markets: A Principal Component Analysis," Working Papers Central Bank of Chile 333, Central Bank of Chile.

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