Impact of macroeconomic variables on stock prices in nepal

Abstract

This study investigates the impact of key macroeconomic variables on stock prices in Nepal, focusing on the NEPSE Index as a measure of stock market performance. The purpose is to examine the short and long-term relationships between selected macroeconomic indicators, real gross domestic product (GDP), broad money supply (M2), inflation rate, interest rate, and stock market prices. The research employs a descriptive and causal-comparative research design. Descriptive statistics such as mean, standard deviation, skewness, and kurtosis are used to summarize data trends. Correlation, regression, and cointegration analyses are applied to assess the strength, direction, and equilibrium relationship between variables. Annual secondary data from 1994 to 2024 are sourced from Nepal Rastra Bank, NEPSE, and the World Bank. A longterm equilibrium link between the variables is

revealed by cointegration analysis. Based on the findings, the study concludes that macroeconomic stability, particularly in real GDP and money supply, plays a vital role in the performance of the stock market. The results imply that investors should monitor macroeconomic indicators to make informed decisions, while policymakers should prioritize consistent economic planning. Future research should incorporate additional macroeconomic indicators such as exchange rates and foreign investment, and adopt advanced econometric models to capture nonlinear and time-varying dynamics.

Keywords: Macroeconomic Variables, Stock Prices, NEPSE, Cointegration, GDP