Stock Market Equilibrium and Macroeconomic Fundamentals
IMF Working Papers, January 1, 1997
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- Stock Market Equilibrium and Macroeconomic Fundamentals
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Bibliographic details
- Authors: Lamin Y Leigh
- Published: January 1, 1997
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451843224.001
Overview
- Author: Lamin Y Leigh
- Publication date: January 1, 1997
- Scope: Examination of the efficiency of the Stock Exchange of Singapore and the relationship between the stock market and the overall economy of Singapore.
Methods
- Uses a wide range of methods for testing market efficiency.
- Employs Granger causality tests based on the efficiency test results.
- Applies asset-pricing frameworks and vector autoregression techniques (as indicated by subject and keywords).
Main findings
- The Singapore stock market is both “weakly” and “semi-strongly” efficient in asset-pricing terms.
- The Singapore stock market is not “strongly” efficient.
- Granger causality tests indicate that developments in the stock market appear to be systematically related to the overall economy in Singapore.
- The stock market can thus serve as a leading indicator of the intertemporal behavior of the Singapore economy.
Implications for analysis and policy
- Asset-pricing efficiency at the weak and semi-strong levels supports the use of historical prices and publicly available information in modeling Singapore stock returns.
- Lack of strong efficiency implies limitations for models that assume complete informational symmetry (i.e., private information may affect prices).
- Because stock market developments appear systematically related to the overall economy, policymakers and forecasters could monitor aggregate stock market indicators as a leading signal of intertemporal macroeconomic dynamics.
Keywords and subjects (as presented)
- Subjects: Asset prices, Demand for money, Econometric analysis, Financial institutions, Financial markets, Money, Prices, Stock markets, Stocks, Vector autoregression
- Keywords: aggregate stock market indicator, Asset prices, Demand for money, efficiency test, Global, money demand, present value, share price, Singapore stock market, stock market, stock market efficiency, Stock markets, stock return, Stocks, Vector autoregression, WP
IMF Working Paper — "Stock Market Equilibrium and Macroeconomic Fundamentals", Lamin Y Leigh, January 1, 1997.
Content in this bundle
- Stock Market Equilibrium and Macroeconomic Fundamentals - WP/97/15