International Journal of Science, Engineering and TechnologyAuthors: Mrs. R. Santhiya, Dr. P. Ashok Kumar
Abstract: This study investigates the time-varying interactions between macroeconomic factors and stock market volatility in two major developing economies, India and China, using annual data spanning the period 1991-2024. The increasing integration of financial markets with macroeconomic fundamentals has intensified the need to understand the economic variables influence stock market dynamics across different time horizons by using Wavelet Coherency transformation (WCT) approaches is used to examine the co-movement, lead-lag relationships, and transmission mechanisms between stock market volatility and selected macroeconomic indicators, including GDP, inflation, export, import and gross capital formation. The findings are expected to reveal substantial heterogeneity in the strength and direction of relationships across different frequencies and economic regimes. Wavelet coherence results are anticipated to indicate stronger co-movements during periods of financial and economic turbulence, including the Asian Financial Crisis, the Global Financial Crisis, the COVID-19 pandemic, and recent geopolitical uncertainties. The phase-difference analysis is expected to demonstrate that macroeconomic variables exhibit varying leadership roles across time scales, with inflation and interest rates exerting greater influence in the short run, while economic growth and money supply dominate long-run market movements. Furthermore, the comparative analysis is likely to show that China’s stock market exhibits relatively stronger long-term coherence with macroeconomic fundamentals, whereas India’s market demonstrates more dynamic short- and medium-term interactions.
DOI: http://doi.org/10.5281/zenodo.20760756
