THE EFFECT OF MACRO-ECONOMIC INDICATORS ON STOCK PRICES: HETEROGENEOUS PANEL DATA ANALYSIS

This study investigates the effects of countries' main macroeconomic indicators on stock prices. Although many studies have been conducted on the effects of macroeconomic indicators on stock prices, the results of these studies do not overlap with each other. For this reason, a heterogeneous panel data model was created to determine the effect of the main macroeconomic indicators, which exchange rates, interest rates, inflation, and economic growth in 27 countries, on stock prices over the 22-year period between 2000 and 2021 and was analyzed with the help of the Extended Average Group Estimator (AMG). Although the results of the analysis differ in units, they show that economic growth has a positive and significant effect on stock prices across the entire panel. Other variables had no significant effect on the entire panel. The fact that the analysis results differ on the basis of all panels and units reveals the importance of country-specific factors.