A Review of Research on the Relationship between Macroeconomic Variables and Stock Market Returns
DOI:
https://doi.org/10.54097/0nc9fa59Keywords:
Macroeconomic variables, Stock market returns, Asset pricing models, VAR/SVAR, GARCH, Policy uncertainty.Abstract
This paper provides a comprehensive review of research on the relationship between macroeconomic variables and stock market returns. Theoretical foundations such as the Capital Asset Pricing Model (CAPM), Arbitrage Pricing Theory (APT), and Discounted Cash Flow (DCF) models explain how macroeconomic factors influence asset pricing through risk premiums, factor exposures, and corporate cash flows. Foreign studies, which began earlier, have developed mature analytical frameworks ranging from linear regressions to dynamic and nonlinear models such as VAR/SVAR, GARCH, and copula functions. Their findings generally confirm stable and significant linkages between macroeconomic indicators and stock returns in mature markets. In contrast, domestic research emphasizes market inefficiency, policy intervention, and investor behavior, employing methods such as cointegration analysis, event studies, and semi-parametric models. Results often reveal weak or stage-specific correlations, reflecting incomplete transmission mechanisms. Overall, macroeconomic variables—including GDP, inflation, money supply, interest rates, and exchange rates—affect stock markets through multiple channels, but the strength and stability of these effects depend on institutional and structural contexts. Future research should incorporate high-frequency data, strengthen expectation and behavioral modeling, refine industry-level analysis, and expand cross-market comparisons to better capture the complex dynamics between macroeconomics and financial markets.
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