A Singaporean Study on Macroeconomic Variables Impacting Stock Returns

Boon Leng Mark Goh, Ameen Ali Talib

Abstract


Stock market returns has increasingly become a leading indicator of a country’s economic performance. This explains academia’s growing interest in determining factors affecting stock returns. A majority of recent studies on Singapore’s economic performance focused centrally around policy impact or property prices, and not specifically on stock returns. This study aimed to fill this gap, by examining if, and how, historical movements in the Straits Times Index (STI) were explained by the S$NEER, Monetary Supply, CPI, Balance of Payments, Crude Oil Prices, Electricity Generated, GFCF, Industrial Production, Merchandise Trade, or Labour Cost. By utilizing a Structural Vector Auto regression (SVAR) Model, approximately 48% of the STI’s variance was collectively attributable to these ten macroeconomic variables, all of which had short-term impact on the STI. Looking forward, further research could be conducted examining the impact of said variables on individual sectoral stock indices, for greater insight on the dynamics of their relationships.


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DOI: https://doi.org/10.5296/ajfa.v9i2.11962

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