Factors affecting stock market index volatility: Empirical study

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Abstract

How is stock market price volatility affected, and what is the nature of the impact that macroeconomic variables do on the stock market price direction? The main objective of this study is to investigate the impact of some selected macroeconomic variables (inflation rate (INR), interest rate (IR), economic growth rate (EGR), and foreign investment (FI)) on Amman Stock Exchange (ASE) fluctuation for the period 1999–2018. The information is based on the annual data published by industrial companies listed at ASE. The study adopted a descriptive-analytical approach, also simple and multiple linear regression analysis was employed for the mentioned purpose (Nurfadilah & Samidi, 2017). The results revealed that there is no statistically significant impact of INR, IR, EGR, and FI collectively on ASE performance (Niewińska, 2020). Individually, the results indicated that there is a statistically significant impact of all variables (INR, IR, EGR, and FI) on ASE performance. Additionally, the results concluded that foreign investment, portrayed the highest impact factor on ASE performance, followed by a change in average interest rate, then inflation rate, and the least impact attributes to the economic growth rate. Finally, the research recommends that Jordanian banks should reduce the lending interest rate to enhance investment in securities and improve economic growth rate, also Jordanian authorities should encourage foreign direct and indirect investment and make more efforts to attract more foreign investment, either in the form of tax incentives or by extending finance at low-interest rates.

Keywords: Inflation, Interest, Economic Growth, Foreign Investment, ASE Performance

Authors’ individual contribution: Conceptualization — M.A.A. and T.A.K.; Methodology — T.A.K.; Formal Analysis — M.A.A.; Software — M.A.A.; Validation — T.A.K.; Investigation — T.A.K.; Writing — Original Draft — M.A.A.; Writing — Review & Editing — T.A.K.; Supervision — T.A.K.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G11, G12, G14

Received: 14.06.2021
Accepted: 13.08.2021
Published online: 17.08.2021

How to cite this paper: Al-Rimawi, M. A., & Kaddumi, T. A. (2021). Factors affecting stock market index volatility: Empirical study. Journal of Governance & Regulation, 10(3), 169–176. https://doi.org/10.22495/jgrv10i3art15