Macro-financial nexus: a systematic review on the impact of macroeconomic factors on bank stock returns

The performance of bank stocks exhibits a country’s overall financial health and signals economic growth. Therefore, understanding the interaction of macroeconomic factors on bank stock returns is crucial for the valuation of financial assets, especially in a highly volatile stock market. Although macroeconomic factors and their impact on bank stock returns have been extensively investigated, there is still a dearth of comprehensive review articles in this domain. To address this lacuna, we conducted a systematic review to identify the macroeconomic determinants driving bank stock returns. Through a systematic search, 64 articles were identified from two electronic databases for literature synthesis based on inclusion and exclusion criteria from 1980–2023. The review posits valuable insights into the macroeconomic factors that influence bank stock returns, the nuances of the variables’ effects and the methodologies employed in these studies. The key macroeconomic factors identified include interest and exchange rate sensitivity, which has been studied extensively; however, the impact of monetary policies, gold prices and oil prices needs further investigation. Subsequently, the study documents various bank-specific characteristics that influence the relationship between macroeconomic factors and bank stock returns.