An empirical study on the relationship of Philippine macroeconomic variables to the volatility of the Philippine stock exchange index (PSEi)

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management Department

Document Type

Article

Source Title

Advanced Science Letters

Volume

21

Issue

5

First Page

1521

Last Page

1524

Publication Date

1-1-2015

Abstract

This empirical study explores, investigates and analyzes the dynamic relationship between general macroeconomic variables in the Philippines and the overall movement of the Philippine Stock Exchange Index (PSEi). The monthly data of four macroeconomic variables, namely, Consumer Price Index (CPI), overall inflation rate, Industrial Production (IP) (as a proxy for GDP), Trade Balance, and PSEi price over the period 1998–2013 have been used for this study. This study investigates the time series as analysis of economic variables and stock market movement by using The Augmented Dickey Fuller (ADF) for the test of stationary of the variables, and LaGrange-Multiplier Test of ARCH Test and Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) for the tests of heteroscedasticity in the data. The Granger Test for Causality has been applied to investigate the long-run dynamic interaction between stock market index and the aforementioned macroeconomic variables. The empirical results provide information that the Philippine macroeconomic variables have no substantial effect on the movement of stock prices. The macroeconomic variables used have no significant effects on the volatility of the PSEi and are not considered as substantial contributors for the prediction of the stock market’s future movements. The implication of this study for policymakers and portfolio/fund managers is to consider other variables or economic aspects that may significantly affect the movement of the stock market, thus investors can use such variables in predicting their investment returns. © 2015 American Scientific Publishers. All rights reserved.

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Digitial Object Identifier (DOI)

10.1166/asl.2015.6091

Disciplines

Finance and Financial Management

Keywords

Stock exchanges--Philippines; Economic indicators--Philippines

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