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Stock market consequences of macro economic fundamentals

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Abstract

It is concluded in the study that the Valuation Ratio will be independent from the Equities if equity-elasticity is equal to one. However, Market Capitalization depends on the investment in equities and the market liquidity. The model has been tested in the context of Pakistan and the Monetary and Fiscal policies have been found as the significant determinants of the Market Capitalization.

Suggested Citation

  • Ayub, Mehar, 2000. "Stock market consequences of macro economic fundamentals," MPRA Paper 442, University Library of Munich, Germany, revised 2001.
    • Handle: RePEc:pra:mprapa:442
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    File URL: https://mpra.ub.uni-muenchen.de/442/1/MPRA_paper_442.pdf
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    References listed on IDEAS

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    8. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(2), pages 65-86.
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    11. Holmstrom, Bengt & Tirole, Jean, 1993. "Market Liquidity and Performance Monitoring," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 678-709, August.
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    15. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Hussain, Adnan & Lal, Irfan Lal & Memon, Mubin, 2013. "Short run and Long run Dynamics of Macroeconomic Variables and Stock prices: Case Study of Karachi Stock Exchange," MPRA Paper 37889, University Library of Munich, Germany.

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    More about this item

    Keywords

    Co-integration; Granger’s Causality; Liquidity-Elasticity; Equity-Elasticity; Market Capitalization; Simulation;
    All these keywords.

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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