The Impact of Macroeconomic Factors on Amman Stock Market Returns

  •  Hasan Mohammed El-Nader    
  •  Ahmad Diab Alraimony    


The purpose of this research is to investigate the impact of macroeconomic factors on Amman Stock Market (ASE) Returns employing monthly data between (1991and 2010). This study uses six macroeconomic factors: Real money supply (RMS2), real gross domestic product (RGDP), consumer price index (CPI), real exchange rate (E1), weighted average interest rates on loans and advances (WAIR), and a dummy variable (DUM). 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) does not seem necessary. However, the ARCH (1) performed well. The results of the ARCH (1) estimation showed that RMS2, CPI, E1, WAIR and the Dummy Variable have a negative role on the ASE returns. In contrast, the RGDP has a positive impact.

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