Macroeconomic Factors and their Impact on Stock Market Volatility: Trends, Drivers, and Policy Recommendations
DR. KIRAN KUMAR M1, ALISTER PRINSON DSOUZA2, VIBHA V3, VEDANT PANDURANG KANSE4
1Assistant Professor – Finance, 2 MBA Student of Finance, 3 MBA Student of Finance,4 MBA Student of Finance Faculty of Management Studies, CMS Business School, Jain (Deemed-to- be University), Bengaluru - 560009
ABSTRACT
The study investigates how key macroeconomic factors contribute to stock market volatility from 2015 to 2024, a period marked by significant economic fluctuations and policy shifts. Focusing on variables such as GDP growth, inflation, interest rates, and economic policy uncertainty, this research examines their impact on market stability across developed and emerging economies. Using quantitative analysis and secondary data, the study highlights periods of heightened volatility in response to economic shocks, particularly around events like the COVID-19 pandemic and subsequent policy responses. Findings reveal that rising inflation and policy uncertainty are primary drivers of volatility, often exacerbating market instability during economic downturns. Additionally, GDP growth and interest rate changes are shown to influence investor sentiment and asset pricing, underscoring the importance of macroeconomic stability for market resilience. While these macroeconomic fundamentals are crucial in understanding market dynamics, this study also addresses challenges in maintaining stability, such as varying policy responses and global economic interdependence, emphasizing the need for adaptive policy frameworks to mitigate volatility risks. This analysis contributes to the broader understanding of how macroeconomic factors shape financial markets, offering valuable insights for policymakers and investors aiming to navigate uncertain economic landscapes.
KEYWORDS
Stock Market Volatility, Macroeconomic Factors, Inflation, GDP Growth, Interest Rates, Economic Policy Uncertainty, Market Behavior.
