Stock Market Trends and Economic Growth: Unraveling the Nexus in the Philippines
Journal Title: Psychology and Education: A Multidisciplinary Journal - Year 2024, Vol 27, Issue 9
Abstract
Investors are using the stock market to invest their money for capital appreciation. Recent advancements in the information system have made stock market investments accessible to various investors. This study aims to examine the relationship between the stock price index and Gross Domestic Product (GDP) using empirical data, focusing on the short-term or long-term relationship, as well as the impact of available information on stock prices. The research is supported by theories such as the efficient market hypothesis, stock valuation theory, the balance sheet model, and Tobin's q theory. Secondary data from 1995-2022 were utilized, with quarterly data obtained from the Philippines Statistics Authority (PSA) and the Macrotrend.Net. Diagnostic tests were conducted to ensure there were no violations of normality, homoscedasticity, and serial correlation. Econometric tests were utilized to test the historical data, including the Augmented Dickey-Fuller (ADF) test for stationarity, the lag length test, the Johansen cointegration test, and the Granger causality test. The results indicate a positive long-term relationship between the stock price index and GDP. The Vector Error Correction Model (VECM) supports this finding, revealing that a 1.02% increase in the stock price index corresponds to a GDP increase. These findings support the balance sheet theory, indicating that well-performing companies attract investment, leading to higher investment income and subsequent positive economic impacts. Additionally, the availability of information plays a role in stock prices, emphasizing the importance of information security for companies. Future research could explore the effects of specific stock classes on GDP, conduct comparative studies among different countries, or examine other economic indicators' influence on stock prices and the economy. Moreover, investigating the impact of information system advancements on stock prices and the overall economy presents an interesting avenue for further exploration.
Authors and Affiliations
Marieta Tabasondra
Keywords
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