Abdul RASHID*, Rashid RAUF** and Muhammad IMRAN***
Abstract
This study empirically explores the influence of macroeconomic volatilities, such as oil-price
volatility, real effective exchange rate volatility and manufacturing output volatility, on stockprice
volatility by using annual firm-level unbalanced panel data over the period 1988-2017.
The empirical results indicate that the impact of macroeconomic volatilities on stock-price
volatility is positive. Firm age and cash holdings significantly positively impact stock-price
volatility. In addition, an index is constructed based on the macroeconomic volatilities using
principal component analysis. The macroeconomic volatility index also has a positive effect
on stock-price volatility. Finally, the results reveal that the impact of macroeconomic volatility
on stock price volatility has a positive effect in the pre-and post-2007 Global Financial Crisis
period. However, the influence is stronger during the pre-crisis period.
Keywords: Stock Prices, Oil Prices, Exchange Rates, Volatility,
Global Financial Crisis.
