Journal of Asset Management

, Volume 13, Issue 2, pp 115–127

Do macro-economic variables explain stock-market returns? Evidence using a semi-parametric approach

  • Sagarika Mishra
  • Harminder Singh
Original Article


In this article we test whether the stock market in India is driven by macro-economic fundamentals. We use a non-parametric approach to determine whether any variables are nonlinearly related with stock returns and the variability of stock returns by taking monthly observations from 1998 to 2008. We consider exchange rate, interest rate, industrial production, inflation and foreign institutional investments as macro-economic factors. Further, we employ a semi-parametric approach to see whether any of the macro-variables have a significant nonlinear impact on the stock return and on the variability of stock return. Our results suggest that of the Ordinary Least Square and semi-parametric approaches, the semi-parametric approach better explains the stock returns and volatility.


semi-parametric model Indian stock return macro-economic variables 


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Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Ltd 2011

Authors and Affiliations

  • Sagarika Mishra
  • Harminder Singh
    • 1
  1. 1.School of Accounting, Economics & Finance, Deakin UniversityBurwoodAustralia

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