Do macroeconomic variables explain future stock market movements in South Africa?

MacFarlane, Andrew

Do macroeconomic variables explain future stock market movements in South Africa?

Master Thesis

2011

Publisher

University of Cape Town

Department

Department of Finance and Tax

Faculty

Faculty of Commerce

Abstract

This study aims to address the empirical question of whether macroeconomic variables drive future stock market returns in South Africa. If found, the macroeconomic variables would therefore constitute useful predictive information for the future FTSE/JSE All Share Index. The data was examined from 1965 to 2010 which constitutes the longest study of its nature in South Africa. The macroeconomic variables were selected based on international and local precedent of intuitive influential macroeconomic factors. Through the use of Johansen multivariate cointegration, Granger causality and innovation accounting, it was found that the selected South African macroeconomic variables did not significantly influence future FTSE/JSE All Share Index returns. Therefore the chosen macroeconomic variables should not be used as a future predictive tool for South African stock market returns.

Keywords

Financial Management

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