Macro Economic Volatility Essay

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Pak J Commer Soc Sci
Pakistan Journal of Commerce and Social Sciences
2013, Vol. 7 (2), 309-320
The Relationship between Macroeconomic Volatility and the Stock Market Volatility: Empirical Evidence from Pakistan

Muhammad Irfan Javaid Attari (Corresponding Author)
PhD Scholar, Shaheed Zulfikar Ali Bhutto Institute of Science and Technology
(SZABIST), Islamabad, Pakistan
E-mail: irfan92edu@yahoo.com

Luqman Safdar
MBA Student, Air University, Multan Campus, Pakistan
E-mail: luqmansafdar@rocketmail.com
Abstract
Macroeconomic variables and stock returns are corelated and analyzed in both countries either developed or developing.unfortunetly not for Pakistan.the study clearifies the analysis of time series of economic variables and stock market
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Fabozzi and Tunaru (2004) used GARCH-M, IGARCH and TAGARCH for Shenzhen and Shanghai markets.
The results show that the evidence of volatility clustering shows each market has a different GARCH model. The models used for testing the spill-over effect between two Chinese markets. Gan et al. (2006) found that the macroeconomic fluctuations are not fully judged by the New Zealand’s stock index.
Beltratti and Morana (2006) had investigated the relationship between stock market and macroeconomic volatility using S&P data and found the causality direction runs from stock market to macroeconomic variables which is most strong than vice versa.
Puah and Jayaraman (2007) had found that all variables show the long term relationship and stock prices are cointegrated with variables in Malaysian stock market. Liu and
Shrestha (2008) found that the long relation exists among stock prices and the macrofactors in China stock market. It also explains that stock market has significant impact in the long run. Gay (2008) had used ARIMA model and no relationship is observed among stock indexes, ER, and OP variables in Brazil, India, Russia and China. Adam and
George (2008) investigated for Ghana by using multivariate cointegration and the

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