The Impact of Macroeconomic Variables on Stock Returns: A Case of the Johannesburg Stock Exchange

Mr. Boldwin Ndlovu (
Near East University, Nicosia
Dr. Faisal Faisal (
Lecturer, Institute of Business Studies and Leadership, Pakistan / Near East University, Nicosia
Assist. Prof. Dr. Nil Gunsel Resatoglu (
Near East University, Nicosia
Associate Prof. Dr. Turgut Türsoy (
Near East University, Nicosia


The study assessed association of macroeconomic variables: inflation (INF), Money supply growth (M3), Interest rates (IR) and USD ZAR exchange rate (EX) using quarterly data from the year 1981Q1 to 2016 Q4 on stock price for the Johannesburg Stock Exchange South Africa. The study employed co-integration tests, vector error correction model, a variance decomposition and an impulse response function to understand the relationship of the variables. In the long run, interest rates, money supply and inflation have a positive relationship with the share price while the exchange rate have a negative effect to the stock prices. Unidirectional causality was found running from exchange rates and interest rates to the share price and also the interest rates and the exchange rates have a causality to the money supply. The variance decompositions established that shocks to the share price account for majority of the changes in itself for all periods during the shortrun and long-run while also cementing results of the causality shocks in the stock price and exchange rate shocks have an impact on changes in themselves, also the impulse response function further confirmed causal relationships between the variables and the stock price.

Keywords: macroeconomic variables, Johansen cointegration, VECM, Impulse response.
JEL Classification Codes: C32, C58, F36, G1, G12.

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Romanian Statistical Review 2/2018