Impact of Macroeconomic Factors on Stock Market in the London Stock Exchange

The paper examined impact of macroeconomic factors on stock market in the London stock exchange. There are thousands of variables that exist in the market which could affect stock market. The empirical studies showed that these variables could be interest rate, inflation rate/consumer price index, exchange rate, industrial production, gross domestic product, money supply, oil prices, unemployment rate etc. The study in consideration selects consumer price index, interest rate, and exchange rate as indicator of economy and tests these variables to see their impact on London stock exchange. The data for 10 years is selected in such a way that it could capture events such as quantitative easing and long-term refinancing programs. The research gave insight of how these variables can affect the stock market when other euro-zone risk factors penetrate in the market. The analysis is performed by using multiple regression technique. The estimated regression gives the output that how these three variables have a significant or insignificant relation with the stock market. The results indicated that consumer price index, interest rate, and exchange rate have an impact on stock market in the London stock exchange.