Determining the effect of macroeconomic volatility on stock returns: Evidence from selected Southeast Asian markets

• Main Authors: Chan, Nathaniel Lewis, Chi, Shi Luo, Henares, Juan Antonio, Uy, Angela Marie
• Format: text
• Language: English
• Published: Animo Repository 2013
• Subjects: Foreign exchange rates > Southeast Asia; Interest rates > Southeast Asia; Industrial productivity > Southeast Asia; Money supply > Southeast Asia; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18537
• Institution: De La Salle University

Asian markets have great potential as these markets are at the forefront of production of global goods such as electronics components and automobiles. However, emerging markets also account for greater risks as compared to that of developed markets. This paper investigates the different effects of key macroeconomic indicators like exchange rate, interest rate, industrial production index and money supply in five South East Asian countries on stock returns. The MSCI World Index and the U.S. 3-month T-bill yield are also included to proxy the effects of global variables. Using a six variable vector autoregressive (VAR) model, the study finds that the global variables, MSCI World Index is consistently significant in explaining all the markets while the U.S. 3-month T-bill yield had varying significance across the markets. The macroeconomic variables were found to impact the markets at different significance and weights. The findings of this study shed light on how both investors and policy makers should make decisions in each country.