The dynamics of macroeconomic variables in Indian stock market: a Bai–Perron approach

Abstract

The stock market is dynamic, so also the economic conditions. Structural breaks are unexpected shifts which occur in a time-series data which may deteriorate the results. The study deals this situation using the Bai–Perron test and examines the impact of select macroeconomic variables on stock market returns and thereafter investigates the causal relations. The study evidenced a significant impact of macroeconomic variables on stock market returns, and such impact was found to be varying across structural periods. The results are aimed to contribute significantly to finance literature and assist market participants and research analysts in evaluating Indian stock market.