Stock Market and Macroeconomic Policies: New Evidence from Pacific Basin Countries

Lee, Unro

Volume 1, Number 4 / December , Pages 255-324

Multinational Finance Journal, 1997, vol. 1, no. 4, pp. 273-289

Unro Lee , University of the Pacific, U.S.A. Corresponding Author

Abstract:
This article investigates whether the stock markets of the Pacific Basin countries of Hong Kong, Singapore, South Korea, and Taiwan are informationally efficient with respect to macroeconomic policies. Granger causality tests are utilized in the context of a Vector Error Correction Model to test the relationship between aggregate stock prices and monetary and fiscal policies. The findings indicate that the stock markets of all four countries are not efficient with respect to both macroeconomic policies. These findings are different from those of other articles focusing on major industrialized countries. Rejection of market efficiency may be attributed to the unique structure of financial markets in these countries.

Keywords : Pacific Basin countries; stock returns; macroeconomic policies; informational efficiency
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