Skip to content

Research at St Andrews

Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan

Research output: Contribution to journalArticle


Andreas Humpe, Peter Macmillan

School/Research organisations


Within the framework of a standard discounted value model, we examine
whether a number of macroeconomic variables influence stock prices in the
US and Japan. A cointegration analysis is applied in order to model the
long-term relationship between industrial production, the consumer price
index, money supply, long-term interest rates and stock prices in the US
and Japan. For the US, we find the data are consistent with a single
cointegrating vector, where stock prices are positively related to industrial
production and negatively related to both the consumer price index and the
long-term interest rate. We also find an insignificant (although positive)
relationship between the US stock prices and the money supply. However,
for the Japanese data, we find two cointegrating vectors. We find for one
vector that stock prices are influenced positively by industrial production
and negatively by the money supply. For the second cointegrating vector,
we find industrial production to be negatively influenced by the consumer
price index and a long-term interest rate. These contrasting results may be
due to the slump in the Japanese economy during the 1990s and
consequent liquidity trap.


Original languageEnglish
Pages (from-to)111-119
Number of pages9
JournalApplied Financial Economics
Issue number2
Early online date14 Jan 2009
Publication statusPublished - 2009

Discover related content
Find related publications, people, projects and more using interactive charts.

View graph of relations

Related by journal

  1. The profitability of banks in Japan

    Liu, H. & Wilson, J. O. S., 24 Dec 2010, In : Applied Financial Economics. 20, 24, p. 1851 - 1866

    Research output: Contribution to journalArticle

  2. What drives performance differences across cooperative financial institutions? evidence for US credit unions

    Wilson, J. O. S., Goddard, J. & McKillop, D., 2008, In : Applied Financial Economics. 18, p. 879-93

    Research output: Contribution to journalArticle

  3. Volatility Forecasts: The Role of Asymmetric and Long-Memory Dynamics and Regional Evidence

    McMillan, D. G. & Evans, P., 2007, In : Applied Financial Economics. 17, p. 1421-1430

    Research output: Contribution to journalArticle

  4. Heterogeneous Information Flows and Intra-Day Volatility Dynamics: Evidence from the UK FTSE-100 Stock Index Futures Market

    McMillan, D. G. & Speight, A., 2006, In : Applied Financial Economics. 16, p. 959-972

    Research output: Contribution to journalArticle

ID: 28386894