The impact of national and global macroeconomic factors on emerging stock markets: A multi-statistical analysis of the MINT countries

<p>This research contributes to an ongoing debate in finance on whether stock markets are<br>  </p> <p>integrated or segmented. The arbitrage pricing theory (APT) suggests that systematic and<br>  </p> <p>unsystematic risks are major determinants of stock market movements which have inspired<br>  </p> <p>scholars to examine factors responsible for high volatility in stock price movement. The<br>  </p> <p>literature on this subject has focused on investigating the impact of microeconomic and<br>  </p> <p>domestic macroeconomic factors on the stock market. However, only a little effort has been<br>  </p> <p>made on the potential impact of global macroeconomic factors, especially the implementation<br>  </p> <p>of monetary policy, through the Federal funds rate, on the emerging markets. There are many<br>  </p> <p>emerging markets in the world, but Mexico, Indonesia, Nigeria and Turkey (MINT) are a group<br>  </p> <p>of emerging markets which has been promoted by investment houses as an alternative<br>  </p> <p>investment destination to international investors hence why the attention on these countries.<br>  </p> <p>The target sample data analysed ranges from 1993 to 2014 and data was retrieved from reliable<br>  </p> <p>sources. There have been discrepancies in the results of researchers, due to the nature of the<br>  </p> <p>statistical methods employed which has created the need for this study to estimate the<br>  </p> <p>statistically significant interaction between stock returns and Federal funds rate, MSCI global<br>  </p> <p>equity index, commodity price index, exchange rate, interest rate and industrial production<br>  </p> <p>using multi-statistical strategy. Time series data analysis was used to conduct ARDL<br>  </p> <p>cointegration, impulse response function, variance decomposition and Granger causality tests<br>  </p> <p>to determine the short and long-run relationships between the variables. The Granger causality<br>  </p> <p>test shows the direction of causality between variables and all tests are conducted using<br>  </p> <p>monthly data.<br>  </p> <p>The findings of this research revealed that MINT countries have significant differences in the<br>  </p> <p>magnitude and their association with domestic and global macroeconomic factors. The results<br>  </p> <p>indicate domestic factors, such as interest rate and exchange rate as the major determinants of<br>  </p> <p>stock return movement in Mexico, Indonesia and Turkey. On the other hand, global commodity<br>  </p> <p>price index is identified as the primary determinants of stock return movement in Nigeria.<br>  </p> <p>Policymakers would benefit from the findings in the preparation of new capital market policies<br>  </p> <p>or modification of existing policies in the interest of the MINT stock markets.</p>