Global Financial Markets: Analyzing The Impact Of Macroeconomic Indicators On Asset Prices

Abstract

Financial markets of the world are relatively sensitive to macroeconomic factors which are key drivers of asset price. The following macroeconomic variables: GDP, inflation, interest rate, and unemployment have been analyzed in this research article concerning their impact on equity, fixed-income securities, commodities, and currencies. The study employs a cross-sectional time-series econometric model and regression analysis to examine the effect of macroeconomic variables on asset prices in the major world markets. The findings indicate that macroeconomic factors significantly affect the prices of assets, but the degree of influence varies with the type and location of the market. The study also confirms that investor sentiment and the integration of the global economy are also instrumental in the fluctuations of the prices of assets. The research therefore implies that investors should focus on the macroeconomic factors and ensure that they incorporate them in the management of their investments to get the best returns. The present study contributes to the existing literature in the field by providing insights into the relationship between macroeconomic factors and asset prices in an inter-connected global economy which may be useful to policymakers, investors, and financial analysts.