Economic and Non-economic Variables Nexus with The Stock Price Index

The past decades have witnessed stimulate growth in size and indices of the emerging financial markets in developing countries. Meanwhile, these markets have witnessed multiple economic and political crises such as the global financial crisis. The main objective of this study is to provide a comprehensive analysis that aims to highlight the determinants of the stock market index in Jordan by investigating the equilibrium relationship between the stock price index and two different groups of variables. The findings of the non-economic variables suggest a noticeable impact from the Gulf-war 1991, September eleven 2001, Iraqi invasion 2003, Amman bombing 2005, and global financial crises 2007, as well as the negative effect of the Arab spring 2011 on the stock price index. The different effects of macroeconomic variables on the SPI had effects on stock returns which might prove useful for portfolio diversification strategies in achieving the best risk-return trade-off. The implication of the findings is that investors get benefits for their portfolios by utilizing macroeconomic information for investment decisions.