The analysis of macroeconomic variables that effect stock returns and application

Undoubtedly, It has been great concern to estimate the correlationbetween the stock exchange earnings and the macroeconomic variables byinvestors, governmental and academic instutions. In this study we aim toinvestigate the possible relationships between the chosen macroeconomicvariables like money supply (M1), exchange rate (USD), inflation rate, brentpetrol prices and global gold prices and the Istanbul Stock Exhange IMKB-100index for the period 1998 January and 2009 November.The time series data for macroeconomic variables are evaulated based onthe Johansen Cointegration test is used . The outcome of the Johansencointegration analysis supports that there exits long run relationship betweenIMKB 100 indice and the chosen macroeconomic variables. Granger causalitytests are based on the Vector Error Correction Model (VECM) produced thatall the chosen macroeconomic variables cause the IMKB 100 index in Grangersense. Stock prices cause only exhange rate in Granger sense.