Impact of macroeconomic variables on the performance of stock exchange: a systematic review

Abstract 

Purpose – This paper aims to identify various macroeconomic variables that affect the stock market performance of developed and emerging economies. It also investigates the effect of these factors on the stock markets of both economies. The impact of these variables on broad market indices and sectoral indices is investigated and compared too. 

Design/methodology/approach – The publications for the study were retrieved from databases such as Emerald Insight, EBSCO, ScienceDirect and JSTOR using the keywords “Macroeconomic variables” and “Stock market” or“Stockmarket performance.”The result demonstrated a growing corpus of scholarly work in the domain of stock market. The study was carried out separately for each macroeconomic indicator. Given a large number of articles under consideration, the authors began by reading the titles and abstracts of all publications to identify those that were relevant. The papers are evaluated in Excel and the articles for review range from 1972 to 2021. 

Findings – The authors found that gross domestic product (GDP), FDI (Foreign Direct Investment) and FII (Foreign Institutional Investment) have a positive effect on both emerging and developed economies’ stock market while gold price has a negative effect. Interest rates had a negative impact on both economies except for a few developing countries. The relationship with oil prices was positive for oil exporting countries while negative for oil importing countries. Inflation, money supply and GDP are the macroeconomic variables that have the same effect on sectoral indices as they do on broad market indices. The impact was sector-specific for the remaining variables. 

Research limitations/implications – This paper gives an overview of relation and effect covering variety of macroeconomic variables and stock market indices. Still, there is a scope for further research to analyze the effect on thematic, strategy and sectoral indices. A longer time horizon with new variables, such as bank deposit growth rate, nonperforming assets of banks, consumer confidence index and investor sentiment, can be studied using high-frequency data. This research may help stakeholders adopt and manage their policies during a crisis or economic slump. 

Practical implications – This study will assist investors, researchers and educators in the fields of economics and finance in understanding how macroeconomic factors affect the stock market. Furthermore, this study can guide in portfolio diversification strategy across multiple sectors by examining the impact of macroeconomic factors specific to sectoral indices. This paper provides insight into society and researchers since it integrates a number of macroeconomic variables and their interaction with the stock market. It may also help pension funds and mutual fund firms to hedge their funds and allocate equity portfolios. 

Originality/value – With respect to India, this study looked at new macroeconomic variables and sectors. It contrasted the impact of these variables in developed and developing economies. The effect of broad and sectoral stock indexes was also investigated and compared. The authors examined how these variables responded during crisis and economic downturns by using articles from a longer time frame. This research also looked into how changing the frequency of data for the variables altered stock performance. This paper emphasized the need for more research into thematic, strategy and broad market indices, such as small-cap and mid-cap indices. 

Keywords Stock market, Stock index, Macroeconomic variables, Regression, ADF test, Johansen cointegration test, ARDL, VECM, GARCH 

Paper type Research paper

Please read full text here: https://doi.org/10.1108/IJOEM-11-2019-0993

 

Stock Market Reaction on Green-Bond Issue: Evidence from Indian Green-Bond Issuers

Abstract

Purpose: A green bond is a financial instrument issued by governments, financial institutions and corporations to fund green projects, such as those involving renewable energy, green buildings, low carbon transport, etc. This study analyses the effect of green-bond issue announcement on the issuer’s stock price movement. It shows the reaction of the stock price after the issue of green bonds.

Methodology: This study is based on secondary data. Green-bond issue dates have been collected from newspaper articles from different online sources, such as Business Standard, The Economic Times, Moneycontrol, etc. The closing prices of stocks have been taken from the NSE (National Stock Exchange of India Limited) website. An event window of 21 days has been fixed for the study, including the 10 days before and after the issue date. Data analysis is carried out through the event study method using the R software. Calculation of abnormal returns is done using three models: mean-adjusted returns model, market-adjusted returns model and risk adjusted returns model.

Findings: The results show that the issue of green bonds has a significant positive effect on the stock price. Returns increase after the green-bond issue announcement. Although the announcement day shows a negative return for all the samples taken for the study, the 10-day cumulative abnormal return (CAR) is positive. Thus, green-bond issues lead to positive sentiments among investors.

Research implications: This research article will help the government issue more green bonds so that the proceeds can be utilized for green projects. The government should motivate corporations and financial institutions to issue more green bonds to help the economy grow. In India, very few organizations have issued a green bond. It will be beneficial if these players issue green bonds, as it will increase the firms’ value and boost returns to the investors.

Originality/value: The effect of green-bond issue on stock returns has been analysed in some studies in developed countries. This is the first study to examine the impact of green-bond issue on stock returns in the Indian context, to the best of our knowledge.

Key Words: Sustainable Development, Green Bonds, Stock Returns, Event Study Method

Read full text here: Stock Market Reaction on Green-Bond Issue: Evidence from Indian Green-Bond Issuers

Quote of the day

Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid - Albert Einstein

This is why you need to analyze & evaluate your work and decide whether you should continue the task you are doing or delegate it wholly or partially to someone else who can do in a better way.

Strength Grows in the moments when you think you can't go on but you keep going anyway.

HOPE IS A RENEWABLE OPTION: IF YOU RUN OUT OF IT AT THE END OF THE DAY, YOU GET TO START OVER IN THE MORNING.

Never lose hope, my heart, miracles dwell in the invisible - RUMI

We became what we think about most of the time, and that's the strangest secret - Earl Nightingale

Keep walking through the storm, your rainbow is waiting on the other side.

Take responsibility of your own happiness, never put it in other people's hands - Roy T. Bennett

I believe that the only courage anybody ever needs is the courage to follow your own dreams - Oprah Winfrey

The Last of the Mohicans (Instrumental Cover)

Quote of the day

5AM: The hour legends are either going to sleep or waking up - Millionaire Minds

"If you don't make mistake, you're not working on hard enough problems. And that's a big mistake." - Frank Wilczek (an American theoretical physicist, mathematician, and Noble laureate)

“If we don’t change direction soon, we’ll end up where we’re going.”
– Professor Irwin Corey (an American stand-up comic, film actor, and activist)

PUSH YOURSELF, because no one else is going to do it for you.

If you don't BUILD YOUR DREAMS someone else will hire you to build theirs.

You don't need anything different to make money, you just need better.

What we fear of doing most is usually what we most need to do - Ralph Waldo Emerson

Happy people plan actions, they don't plan results - Denis Waitley

Re-set, re-adjust, re-start, re-focus... As many times as you need to.

The first duty of a man is to think for himself - Jose Marti

Not all storms come to disrupt your life, some come to clear your path.

Quote of the day

Hope is passion for what is possible - Soren Kierkegaard 

You develop courage by surviving difficult times and challenging adversity - Barbara De Angelis

Quote of the day

"Everything you can imagine is real." - Pablo Picasso

"Sometimes there's not a better way, Sometimes there's only the hard way." - Mary E. Pearson

Best way to Invest in Gold - SGBs

Sovereign Gold Bonds : Features and Advantages

If you are looking for investment in gold, invest in SGB instead of physical or gold ETF. It is the best way for investing in gold. It is issued by RBI on behalf of the Government of India. It comes in Demat form, not in physical gold. That is why it very safe and pure. In physical gold there is a risk of theft and other costs involved. Also, you are going to get 2.5% per annum interest on it that is a kind of bonus to you for holding it in Demat form. And there are so many benefits of SGBs, which has been highlighted below. Read and explore more.

Storage - Risk free investment, no storage cost or maintenance cost

Tax benefits - No tax on capital gain out of gold price appreciation, if redeem after maturity

Trade on stock exchange - You can redeem in the secondary market (Stock market), if required

Indexation benefit - Long term capital gain from selling it in secondary market are indexed

Interest - Interest @2.5 % per annum on the market price of gold twice a year

Hedge against Inflation

Discount - INR 50 per gram discount on the nominal value

Investment - Minimum 1 gram, Maximum 4 KG per investor, for entities 20 KG

Tenure - 8 years

How to invest in SGB

Use following mode to invest - 

Nationalized banks

Scheduled private and foreign banks

Designated post offices

Stock Holding Corporation of India Ltd. (SHCIL)

Authorized stock exchanges

- Date for subscription for SGB is released on RBI website for year 2021. Check using the link below-

RBI Notification

Read | Invest | Earn | Grow |

References -

https://scripbox.com/mf/sovereign-gold-bonds/

https://www.icicibank.com/Personal-Banking/investments/sovereign-gold-bond/benefits.page

Quote of the day

"Life is not about finding yourself. Life is about creating yourself."

-George Bernard Shaw

Quote of the day

A calm sea does not make A SKILLED SAILOR.

Can you get 1 Cr with just spending of 300 per day and without taking any risk?

Invest in PPF 300 per day or 9000 per month and see the magic of the power of compounding. I am assuming an 8% interest rate on PPF. Keep putting your money for 15 years and don't withdraw it after maturity. Just extend it 3 times more for a period of 5 years each. Your total investment horizon will be 15+15=30 years. In just 30 years, you are going to be a millionaire. Is not it amazing.!

References: https://tinyurl.com/mj9um4nw

Invest in Post Office Scheme and earn 4950 per month

If you deposit 9 lakh in the post office scheme, you will get interest on it @6.6% which will be 59400. You can withdraw this amount @4950 per month. To deposit 9 lakh, you need to open a joint account. The single account holder can deposit up to 4.5 lakh only. The maturity period is only 5 years, so you can extend it after maturity.

Read more here - https://www.msn.com/en-in/money/topstories/post-office-scheme-get-rs-4950-per-month-on-your-investment/ar-BB1gMlue?ocid=XMMO

Also, you can go to your nearest post office to get more information about it.

Quote of the day

 "IF YOU HANG OUT WITH CHICKENS, YOU ARE GOING TO CLUCK AND IF YOU HANG OUT WITH EAGLES, YOU ARE GOING TO FLY"

Do you want to be rich?

The first thing which you need to have a financial discipline. Well! What about income? Definitely, you have to earn before investment. Do your business, job, etc. But the thing is, if you are keeping your money in the saving account, definitely you are not going to be rich. You need to learn how to grow your money. So, here I advise you to keep some money in the savings for emergency purposes and invest the rest money as per your future requirement. Because this is the way you are going to utilize your money in an efficient way which will help you in creating your wealth. The investment avenues can be Stocks, Mutual funds, PPF, NPS, Bonds, Gold, CryptoCurrency, etc. Invest in these funds as per your risk appetite. 

The sooner you start investing for longer-term as much as you can, you will able to create more wealth. The power of the compounding effect has a crucial role in increasing your money, so start early.

Here, the intention is to motivate you to start investing as soon as possible. 

More updates are on the way, till the time expand your financial knowledge from as many as different sources. Learning is necessary for your growth. 

Impact of COVID-19 on Different Sectors of the Economy Using Event Study Method: An Indian Perspective

ABSTRACT

This research examines the impact of the lockdown announcement imposed by the Indian government on the different leading sectors of the economy such as pharmaceuticals, FMCG, Financial services, banking, energy, etc. Event study method has been used to analyze the data. Lockdown announcement day has been considered as the event for our study. We have taken a 40-day event window, i.e., 20 days before and 20 days after the date of the announcement. Secondary data is used in the study and the same is collected from the NSE website. Using MS Excel, we have applied three methods for analysis—mean-adjusted, market-adjusted, and risk-adjusted abnormal return. Auto, Bank, Financial Services, FMCG, IT, Media, Metal, Pharma, Private bank, PSU Bank, Realty, Oil & Gas, and Energy are sectors of NSE that were taken for the study. Our results indicated that most of the sectors performed positively and gained abnormal returns during 21 days after the announcement. It showed that these sectors recovered their position after going down the market index. This shows that investors were confident that the impact was due to the abnormal condition of the market and not due to the fault or fundamental problems of these sectors. Based on the results, investors may decide to hold their position in the stock that has recovered during the period. Also, investors can diversify their portfolio in those sectors to which abnormal return was positive besides the COVID-19 impact. This is the first study to analyze the effects of the announcement of lockdown due to COVID-19 on the stock market performance of different sectors using the event study method in the context Indian stock market.

KEYWORDS - Stock market; sectoral indices; COVID-19; event study method

Read the full text here - Impact of COVID-19 on Different Sectors of the Economy Using Event Study Method: An Indian Perspective

#1Music | Resolution 1| 2021 | Pianesh |