The Effects of Common Economic Factors on International Equity Markets

Abstract

“This paper is concerned with investigating the effects of macroeconomic variables on stock prices in the United States, the United Kingdom, Germany, France, Norway, Japan, Singapore, Malaysia, Australia, and South Afica. Using APT and Multi-Index model through Fama- MacBeth procedures (1973), we found that international stock prices are systematically affected by similar economic factors, ie. the US industrial production, French unemployment, Australian unemployment, Singapore exports and Japanese money supply. This implies the equity markets and the economies between these countries are becoming integrated.