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Arab Journal of Administration المجلة العربية للإدارة

Abstract

The study and analysis of the relationship between macroeconomic variables and stock prices is one of the most important areas which make a contribution in putting appropriate economic policies to maintain stability in the financial markets, and then drawing economy as a whole. The purpose of this research is to investigate the impact of macroeconomic factors on Amman Stock Market (ASE) Returns employing quartely data between (1993- 2012), for the important and vital role played by financial markets to move the economy of any country. This study uses six macroeconomic factors: Real money supply (M2), real gross domestic product (RGDP), consumer price index (CPI), weighted average interest rates on loans and advances (WAIR), Worker Remittance (WRMIT). The normality test and unit root tests are applied to the data. Also, OLS, ARCH /GARCH models are utilized. The OLS estimations are inefficient due the existence of serious autocorrelation and a sign of Multicollinearity, and are inconclusive. For this, the study used ARCH/ GARCH estimation models. The extension to a GARCH (1, 1) seems necessary. The results of the GARCH (1, 1) estimation showed that CPI and WAIR Variables have a positive role on the ASE returns. In contrast, the M2 and WAIR have a positive impact. The study recommended the need to deepen investment awareness among Jordanian and Arab investors in general through future plans based on the foundations of the process to encourage investment. The study came out a set of recommendations and the most important that the monetary authority of the Government of the Kingdom of Jordan performing procedures Evaluative of the various policies taken by it, as well as establishing centers for research and consulting at a high level of efficiency.

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