MACRO-ECONOMIC ENVIRONMENT AND STOCK MARKET PERFORMANCE: EMPIRICAL EVIDENCE FROM THE SOUTH ASIAN REGION

Abstract

The current research set out to check if there is a consistent pattern between countries regardingmacroeconomic issues' effect on South Asian stock markets. South Asian economies, in particular, have received less attention than other regions and economies, and much existing research focuses on stock markets in industrialized nations. The eleven years of data beginning in 2010 and ending in 2020 are the basis for this analysis. This study used the Panel AR-Delta (ARDL) technique to examine the connection between stock market performance and macroeconomic parameters for four important south Asian countries: Bangladesh, India, Pakistan, and Sri Lanka. Using the unit root test, we can see that the data is stationary across all levels. The long-term and short-term relationship between all variables has been explained using the Panel cointegration and Panel ARDL/PMG model. This study establishes a causal link between the SMP and the aforementioned ER, FDI, FATF, and MSCI SMC variables. The Granger causality test showed that all relationships were unidirectional. As a result of this study, investors, policymakers, and scholars should better understand the trends affecting South Asian stock markets.

Keywords: South Asia, Stock market Performance, Macroeconomic variables, ARDL, PMG, Granger Causality, FATF, MSCI Stock market classification.