The influence of macroeconomic factors on PSE sectoral indices: A structural equation model approach

• Main Author: Fernandez, Noime B.
• Format: text
• Language: English
• Published: Animo Repository 2019
• Subjects: Macroeconomics; Stock exchanges > Philippines; Stock price indexes; Philippine Stock Exchange
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/7023
• Institution: De La Salle University

This study investigates whether macroeconomic factors under Business Activity (EA), Consumer Activity (CA) and Monetary Policy (MP) could influence the performance of Philippine stock market. Sector indices from the period of 2006 to 2018 were used to measure the overall performance of the Philippine stock market. The study has developed an economic-based model for each sector that simultaneously examine the direct and indirect impact of macroeconomic variables on the stock market using Structural Equation Modeling (SEM). It was revealed that Consumer Activity was the main driver that affects the performance of all sectoral indices listed in the Philippine Stock Market. Business Activity (BA) is also a significant factor but only for the Financial, Industrial, and Property Sectors. On the other side, Monetary Policy showed significant direct effect to Financial, Holding Firms, Services, and Mining-Oil Sectors but no direct effect to Industrial and Property Sector. However, the total effect of monetary policy to Industrial and Property sector have significant effect when the mediating variables (business and consumer activity) are controlled. The results of this study could be a reference tool for both institutional and individual investors to use the fundamental information like macroeconomic factors in providing them alternative approach to analysis that will guide them in choosing a sector where to invest in.