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Can macroeconomic factors explain equity returns in the long run? The case of Jordan

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  • Gazi Mainul Hassan
  • Hisham M. Al refai

Abstract

There is a growing literature on how macroeconomic variables can have effects on equity returns in both developed and emerging stock markets. We test for the long run relationship between some key macroeconomic indicators and equity returns in Jordan. Using both General-to-Specific (GETS) methodology and the Autoregressive Distributed Lag (ARDL) approach to cointegration, we find that the trade surplus, foreign exchange reserves, the money supply and oil prices are important macroeconomic variables which have long run effects on the Jordanian stock market. The results are broadly consistent with similar studies carried out for other emerging economies.

Suggested Citation

  • Gazi Mainul Hassan & Hisham M. Al refai, 2012. "Can macroeconomic factors explain equity returns in the long run? The case of Jordan," Applied Financial Economics, Taylor & Francis Journals, vol. 22(13), pages 1029-1041, July.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:13:p:1029-1041
    DOI: 10.1080/09603107.2011.637892
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    Cited by:

    1. Khan, Mashrur Mustaque & Yousuf, Ahmed Sadek, 2013. "Macroeconomic Forces and Stock Prices:Evidence from the Bangladesh Stock Market," MPRA Paper 46528, University Library of Munich, Germany.
    2. Linas Jurksas & Arvydas Paskevicius, 2017. "The Relationship Between Macroeconomy And Asset Prices: Long Run Causality Evidence From Lithuania," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 8(1).
    3. Kuwornu, John K.M., . "Effect of Macroeconomic Variables on the Ghanaian Stock Market Returns: A Co-integration Analysis," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 4(2), pages 1-12.
    4. Emeka Nkoro & Aham Kelvin Uko, 2013. "A Generalized Autoregressive Conditional Heteroskedasticity Model of the Impact of Macroeconomic Factors on Stock Returns: Empirical Evidence from the Nigerian Stock Market," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(4), pages 38-51, October.
    5. Humpe, Andreas & McMillan, David G. & Schöttl, Alfred, 2025. "Macroeconomic determinants of the stock market: A comparative study of Anglosphere and BRICS," Finance Research Letters, Elsevier, vol. 75(C).
    6. Ruqayya Aljifri, 2020. "The Macroeconomy, Oil and the Stock Market: A Multiple Equation Time Series Analysis of Saudi Arabia," Economics Discussion Papers em-dp2020-27, Department of Economics, University of Reading.

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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