Analysis of the Relationship of Macroeconomic Factors to Emerging Market Stock Prices

Investment plays a role as one component of national income, Gross Domestic Product (GDP). One investment instrument that is considered important in development in each country is the capital market because of its function as the monetary intermediation of every world economy. In the era of globalization, the existence of developed countries and developing countries greatly influences the economic situation of a country, because it will have an impact on the level of state income. This study focuses on analysis relating to macroeconomic factors that influence stock prices in developing countries. This research is descriptive and verification uses a time series methodology with a Vector Autoregressive (VAR) approach where if the data used is a statsioner and is not cointegrated, or will be followed by a Vector Correction Model (VECM). Research data in the form of secondary data with literature and documentation. The countries of China, South Korea, Taiwan, India, Brazil, and Indonesia are the focus of research taken by purposive sampling. The results of the study show that during 2017 market capitalization increased rapidly to nearly $ 100 trillion. Judging from the composition of the market, almost half (43 %) of the stock market is controlled by America, but when viewed from previous years, in fact America has experienced a shrinkage from 50 % in 2000 to 43 % in 2017, as well as Europe (outside the UK) has contracted from 18 % in 2000 to 15 % in 2017. Increasing markets are Asia (excluding Japan) and emerging markets. Asia (outside of Japan) has grown from 5 % to 15 %, while emerging markets have grown initially from less than 1 % in 2000 to 6 % in 2017. From the composition of the market it can be seen that in developed countries namely America and Europe, although it has a large composition but shows a downward trend while the market that is experiencing an increase is a group of developing countries or better known as emerging markets.