This paper aims to examine the relationship between stock prices and
macroeconomic variables in the United States using quarterly data for the period
1988 to 2012. We dentify five macroeconomic variables ( i.e, gross domestic
product, inflation, r
eal money supply, Treasury bill rate, and oil prices) that
researchers have linked to stock prices. We then examine the relationship
between these macroeconomic variables and the S&P500 by estimating
cointegration system using Johansen technique. Moreover, this paper will use
Vector Error Correction Model (VECM) to test the short run relationships. Also,
we use variance decomposition technique to understand which macroeconomic
variable have more explantory power of the variation in the S&P500.
The study aimed to determine the relationship between stock prices
and GDP at the level of the Egyptian economy. By applying a time
series extending from 2001 to 2015.