Stock Market Equilibrium and Macroeconomic Fundamentals

Stock Market Equilibrium and Macroeconomic Fundamentals

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This paper examines the efficiency of the Stock Exchange of Singapore and the relationship between the stock market and the overall economy. Using a wide range of methods for testing market efficiency, the paper establishes that the Singapore stock market is both a€œweaklya€ and a€œsemi-stronglya€ efficient in asset-pricing terms but not a€œstronglya€ efficient. Granger causality tests based on the efficiency test results indicate that developments in the stock market appear to be systematically related to the overall economy in Singapore and can thus serve as a leading indicator of its intertemporal behavior.The efficient Market Hypothesis (EMH) which asserts that prices should reflect the information contained in the historical sequence of prices. Thus, investors ... To define the total return in the stock market, let pt denote the price per share of a stock at time period t and d, the dividend paid at time t. The (one-period) nominal return on a stock can be defined as follows: sr, = (pm - p, + dt)/pt. It is equivalent toanbsp;...

Title:Stock Market Equilibrium and Macroeconomic Fundamentals
Author:Mr. Lamin Leigh
Publisher:International Monetary Fund - 1997-01-01


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