Suisse stock return, Macro Factors, and Efficient Market ‎Hypothesis: evidence from ARDL model

This study investigates the short run and the long run equilibrium ‎relationship between Suisse stock market (SSM) prices and a set of ‎macroeconomic variables (inflation, interest rate, and exchange rate) using ‎Monthly data for the period 1999:1 to 2018:4. Different specifications and ‎tests will be carried out, namely unit root tests (ADF and PP), Vector Auto ‎Regression (VAR) to select the optimal lag length and for Granger causality ‎and Toda and Yamamoto (TY) Wald non causality testing, VEC Model and ‎‎(Johansen, 1988)’ test for no cointegration, and ARDL framework and FPSS ‎test of no cointegration hypothesis. ECM representation of the ARDL ‎model confirm temporal causality between (inflation, interest rate, exchange ‎rate) and the stock price. There is dynamic short run adjustment and long ‎run stable equilibrium relationship between macroeconomic variables ‎‎(except exchange rate) and stock prices in the SSM. This imply that the ‎SSM is informationally inefficient because publicly available information on ‎macroeconomic variables (inflation and interest rate) can be potentially used ‎in predicting Suisse stock prices.‎