LBEF RESEARCH JOURNAL OF SCIENCE, TECHNOLOGY AND MANAGEMENT

Author(s):Tara Lama, Suman Bhattacharya

Abstract:The objective of the study is to examine the impact of macroeconomic variables on stock market index in Nepal. The specific objective of the study is to find the trend of sampled macroeconomic variables: capital expenditure, economic growth rate, foreign reserve and interest rate to stock market index and to examine the impact of sampled macroeconomic variables on stock market index. The historical data are used for the period of 27 years of time starting from 1994 to 2021. Data is analyzed in a quantitatively through regression analysis in E-views. The methodology of the study is descriptive and causal research design and ARDL techniques. The study is mainly concerned with the selected macroeconomic variables: capital expenditure, economic growth rate, foreign reserve and interest rate and its impact to the stock market index in Nepal. The major findings are: there is positive correlation between NEPSE and FR, NEPSE and CE. Further, there is negative correlation between NEPSE and IR, NEPSE and EGR. The bound test results confirmed that there is a long run relationship among all the variables. In long run coefficient estimation of ARDL model, capital expenditure has positive and significant impact on stock market while other variables have insignificant impact on stock market. The paper highlights the findings that economic growth rate has positive and significant impact on stock market at lag (-1) whereas interest rate, foreign reserve and capital expenditure have no significant impact on stock market in short run.

Keywords – Stock market returns, macroeconomic variables, ADF test, ARDL approach