Evaluating the Interplay of Macroeconomic Indicators and the Amman Stock Exchange: Implications for Contemporary Investment Strategies

Abstract

This research aims to examine the dynamic interrelationships among pivotal Jordanian macroeconomic indicators, including GDP, CPI, IPI, M2, Worker Remittances (WRMIT), and Amman Stock Exchange Index (ASEI) over the period spanning from 2012 to 2022. The study employs many statistical methodologies, including the Johansen co-integration test, ARDL approach, the Error Correction Model (ECM), and the Granger causality test. The findings of this study robustly affirm the existence of both long-term and short-term relationships between the ASE and the macroeconomic variables. Specifically, the research substantiates a sustained long-term equilibrium association between ASEI and GDP, CPI, M2, IPI, and WRMIT. Furthermore, it identifies a long-term causality running from these economic indicators to the Amman Stock Exchange, as well as a short-term causality from CPI, GDP, and WRMIT to the ASE. These results raise questions about the ASE's operational efficiency, and investors should incorporate prevailing macroeconomic variables into the investment decision process