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IMPACT OF MACROECONOMIC VARIABLES ON THE STOCK MARKET PRICES OF THE STOCKHOLM STOCK EXCHANGE
Abstract
The key objective of the present study is to investigate the impact of changes in selected macroeconomic variables on stock prices of the Stockholm Stock Exchange (OMXS30). To estimate the relationship, unit root test, Multivariate Regression Model computed on Standard Ordinary Linear Square (OLS) method and Granger causality test have been used. The time period examined is 1993-2012 and all the tests are conducted based on monthly data. Based on estimated regression coefficients and t-statistics, it is found that inflation and currency depreciation have a significant negative influence on stock prices. In addition, interest rate is negatively related to stock price change, but it is not significant in the model. On the other hand, money supply is positively associated to stock prices although not significant. No unidirectional Granger Causality is found between stock prices and all the predictor variables under study except one unidirectional causal relation from stock prices to inflation.
Keywords: Macroeconomics variables, stock prices, OLS, Granger Causality test.