Impact of Macro Level Economic Factors on Capital Market Returns: Evidence from the Emerging Market of Asia

This study examines the impact of macroeconomic variables on stock returns of Pakistan, India and Sri Lanka forthe period of 1997-2014. GMM approach is used to analyze the impact of macroeconomic variables on stock returns.  Variables of the study were T-Bills, Exchange Rate, Consumer Price Index (CPI) and the Industrial Production Index (IPI). The results of study show that T-bills rate has significant negative impact while Exchange rate has a significant positive impact on the Stock Returns of the study period. The results of study show that T-bills rate has significant negative impact while Exchange rate has a significant positive impact on the Stock Returns of Pakistan for the study period. T-Bills have significant negative impact, Exchange rate and Consumer price index having significant positive impact on the stock returns of the India. In the case of Sri Lanka only T-bills rate having significant negative impact on stock returns.