The relationship between macroeconomic factors and stock market performance
Abstract
The relationship between stock market and macroeconomic variables has been
hypothesized in different countries with developed and developing stock markets.
However, the impacts of the macroeconomic variables on Vietnam stock market might
still be unclear. This paper is conducted to examine the relationship between VN-Index
and five macroeconomic variables, namely, inflation, money supply, interest rate,
exchange rate, and oil price over the period January 2001 to July 2013.
Johansen’s co-integration and vector error correction model are applied to test
the long-run relationship between Vietnam stock market and the selected macroeconomic
variables. It is revealed that stock market index is positively related to money supply,
exchange rate, and oil price, while negatively related to inflation and interest rate. They
have at least one co-integration. The results were similar to the hypotheses based on the
theoretical findings and empirical studies.
In conclusion, as being an emerging stock market, Vietnam stock market does
have a correlation to several macroeconomic variables. Furthermore, some conclusion
and recommendations are made to better a future research to clarify the ambitious
relationship between the stock market of Vietnam and economic factors