Macroeconomic State Variables and Stock Market Performance: A Systematic Review and Future Research Agenda

The current study presents a systematic review of macroeconomic risk factors and stock market performance under the broader theme of multi-factor asset pricing or the Arbitrage Pricing Theory (APT). Based on the review of relevant literature, the study summarizes key findings of different research works and identifies significant research gaps that need to be addressed by future research. It assesses the state of published work in the domain of asset pricing by systematically analyzing 116 research articles. The research works whose focal point has been asset pricing have been retrieved from leading databases and journals related to financial economics for the period 1976–2019. The study provides a comprehensive look at the conceptual, theoretical, and methodological (or empirical) developments and patterns prevalent at the aggregate level. The implications of the study hold key importance for academia or future researchers, policy-makers and most importantly the investors for guiding their investment decisions efficiently.