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A STUDY ON THE EFFECT OF GLOBAL ECONOMIC FACTORS ON STOCK MARKET
VOLATILITY
MISS. DIVYA S
Assis an p o esso , Depa men o MBA, Sh ide i Ins i u e o Enginee ing and echnology,
Tumku , Ka na aka, India (di yaballak [email protected] )
MISS. CHANDANA K M
2nd yea MBA s uden , Depa men o MBA, Sh ide i Ins i u e o Enginee ing and
Technology, Tumku , Ka na aka, India ([email p o ec ed] )
ARTICLE INFO ABSTRACT
©2025 RS Publica ion
Pape ID: IJRM-
691EB7B177F8C
Recei ed: 2025-10-27
Published: 2025-11-26
DOI:
h ps://dx.doi.o g
/10.5281/zenodo.17
724646
Page No: 82-90
The s ock ma ke se es as a c i ical elemen o he global -inancial
in as uc u e, whe e in es o s engage in he ading o sha es om publicly
lis ed companies. One o he de-ining cha ac e is ics o he s ock ma ke is
ola ili y— he equen and o en unp edic able -luc ua ions in s ock p ices o e
ime. This ola ili y is shaped by a a ie y o ac o s, including economic, poli ical,
and -inancial in-luences. Among hese, global economic condi ions play a
pa icula ly p ominen ole. Due o he in e connec ed na u e o he wo ld
economy, de elopmen s in one coun y can ha e signi-ican ipple e ec s ac oss
in e na ional ma ke s. Key economic indica o s such as GDP g ow h, in-la ion
a es, and in e es a es a e cen al in in-luencing in es o beha io and ma ke
ends. S ong GDP g ow h ypically e-lec s economic s abili y and can boos
co po a e ea nings, he eby os e ing in es o con-idence. In con as , economic
down u ns o ecessions o en lead o inc eased unce ain y and heigh ened
ma ke ola ili y. This esea ch explo es he complex ela ionship be ween global
economic a iables and s ock ma ke ola ili y, aiming o shed ligh on he
unde lying mechanisms ha d i e mo emen s in -inancial ma ke s.
Keywo ds: Geo poli ical isk, s ock ma ke ola ili y.
INTERNATIONAL JOURNAL OF RESEARCH IN MANAGEMENT
A ailable online on
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ISSN 2249-5908
Ci e This Pape : Ms. Chandana K M and Ms. Di ya S.(2025). "A s udy on he
e ec o global economic ac o s on s ock ma ke ". INTERNATIONAL
JOURNAL OF RESEARCH IN MANAGEMENT (IJRM), ol. 15, no. 6, 2025,
pp. 82-90. DOI: h ps://dx.doi.o g/10.5281/zenodo.17724646
In e na ional Jou nal o Resea ch in Managemen ISSN 2249-5908
A ailable online on h p://www. spublica ion.com/ij m/ij m_index.h m Volume 15 No. 5, 2025
DOI: 10.5281/zenodo.17724646
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INTRODUCTION
The global economy unc ions as a highly in e connec ed and dynamic sys em, whe e a wide
ange o ac o s can impac he pe o mance and ola ili y o s ock ma ke s ac oss he wo ld.
Gaining a clea unde s anding o how global economic a iables in luence s ock ma ke
ola ili y is essen ial o in es o s, inancial analys s, and policymake s alike.
S ock ma ke ola ili y e e s o he ex en o a ia ion o luc ua ion in he p ices o publicly
aded s ocks o e a speci ic pe iod. I is commonly iewed as an indica o o ma ke
unce ain y and isk, in luencing bo h sho - e m ading s a egies and long- e m
in es men decisions. Ele a ed le els o ola ili y can c ea e bo h oppo uni ies and isks,
po en ially leading o signi ican inancial gains o losses o ma ke pa icipan s.
This s udy aims o in es iga e he ela ionship be ween global economic ac o s and s ock
ma ke ola ili y. By analyzing how a iables such as GDP g ow h, in la ion, and in e es a es
a ec ma ke beha io , he esea ch seeks o o e aluable insigh s in o he mechanisms
d i ing s ock ma ke luc ua ions. These indings can help in o m be e decision-making o
in es o s and con ibu e o mo e e ec i e policy esponses in he ace o economic
unce ain y.
Key Global Economic Fac o s In luencing Vola ili y
1. G oss Domes ic P oduc (GDP) G ow h:
GDP g ow h is a key indica o o economic heal h. S ong global economic g ow h ends o
enhance co po a e p o i abili y and in es o con idence, gene ally leading o lowe ola ili y.
Con e sely, economic slowdowns o ecessions inc ease unce ain y, o en causing
heigh ened s ock ma ke luc ua ions.
2. In la ion:
In la ion measu es he ise in o e all p ice le els. Ele a ed in la ion a es ypically igge
conce ns abou he e osion o pu chasing powe and p omp cen al banks o inc ease
in e es a es, which can inc ease ma ke unce ain y and ola ili y.
In e na ional Jou nal o Resea ch in Managemen ISSN 2249-5908
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DOI: 10.5281/zenodo.17724646
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3. In e es Ra es:
Changes in global in e es a es a ec bo owing cos s o businesses and consume s. An
inc ease in in e es a es can educe co po a e ea nings p ospec s and alua ions, o en
leading o highe s ock ma ke ola ili y as in es o s eassess isk and e u ns.
4. Exchange Ra es:
Fluc ua ions in cu ency alues impac mul ina ional co po a ions' ea nings, ade balances,
and in es men lows. Vola ile exchange a es can cause apid changes in s ock p ices,
especially in expo -o ien ed and eme ging ma ke economies.
5. Geopoli ical and Economic E en s:
E en s such as ade dispu es, poli ical ins abili y, global pandemics, and economic sanc ions
in luence in es o sen imen and ma ke s abili y, equen ly leading o sudden spikes in
ola ili y.
METHODOLOGY
S a emen o he P oblem
The connec ion be ween global economic ac o s and s ock ma ke ola ili y is bo h complex
and mul i ace ed, wa an ing deepe in es iga ion. Al hough i is gene ally accep ed ha
economic indica o s such as GDP, in la ion, and in e es a es impac ma ke ola ili y, he
p ecise na u e, s eng h, and di ec ion o hese ela ionships emain unce ain and o en
con es ed. This esea ch seeks o cla i y hese dynamics by examining how key global
economic a iables in luence luc ua ions in s ock ma ke pe o mance, con ibu ing o a
mo e comp ehensi e unde s anding o inancial ma ke beha io .
OBJECTIVES
1. To assess he impac o global economic ac o s on s ock ma ke ola ili y.
2. To Iden i y he key d i e s o he ela ionship be ween global economic ac o s and
s ock ma ke ola ili y.
3. To Explo e po en ial he e ogenei y in he ela ionship be ween global economic
ac o s and s ock ma ke ola ili y.
In e na ional Jou nal o Resea ch in Managemen ISSN 2249-5908
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4. To assess he implica ions o he indings o in es o s and policymake s.
LITYRATURE REVIEW
1. Bhaumik e al. (2013) in es iga ed he ela ionship be ween ading olume and
ange-based ola ili y in he Indian s ock ma ke o e he pe iod 1995–2007. Using a
bi a ia e dual long-memo y model, hey analyzed he dynamics and unce ain y
associa ed wi h bo h a iables. The s udy di e en ia ed be ween ading olume be o e and
a e he in oduc ion o u u es and op ions, e ealing ha bo h he numbe o ades and
he alue o sha es aded had a nega i e e ec on ola ili y du ing all h ee obse ed pe iods.
2. Bak i Abdul Ka im and Hoe Xin Ning (2013) examined he impac o egional
economic in eg a ion in he ASEAN egion, whe e e o s o elimina e ade ba ie s
ha e led o inc eased s ock ma ke ac i i y. Thei indings indica ed a nega i e
co ela ion be ween ma ke in eg a ion and ola ili y, sugges ing ha s onge
economic ies among membe na ions educed o e all ma ke luc ua ions.
3. P e o ius (2002) emphasized ha i one ma ke becomes mo e ola ile han ano he ,
he e u ns o he mo e ola ile ma ke should logically inc ease in compa ison. This
e lec s he isk- e u n ade-o heo y and suppo s he no ion ha ola ili y is
compensa ed h ough highe po en ial e u ns.
4. Rou Ahmad Mi and A shad Nabi Wani (2012) s udied he compe i i e dynamics
be ween India’s wo majo s ock exchanges. They highligh ed how s ock ma ke
indices se e as economic ba ome e s, e lec ing in es o sen imen and expec a ions
abou he b oade economy, as well as p o iding insigh s in o a e age sha e p ices
and o e all ma ke ends.
5. Puja Padhi and Lagesh (2012) explo ed ola ili y ansmission be ween global
inancial ma ke s, ocusing on i e Asian equi y ma ke s, India, and he Uni ed S a es
be ween July 1994 and Sep embe 2009. Thei analysis e ealed in e connec edness
in e u ns and ola ili ies, unde sco ing he signi icance o global ma ke linkages in
shaping egional ma ke beha io s.
RESEARCH DESIGN
This s udy adop s a quan i a i e esea ch design o examine he ela ionship be ween
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global economic ac o s and s ock ma ke ola ili y. The esea ch is based on he analysis o
his o ical da a using s a is ical me hods o iden i y ends, co ela ions, and possible causal
links. This design is sui able o e alua ing la ge da ase s and de i ing meaning ul insigh s
om economic and inancial indica o s.
The s udy ocuses on seconda y da a analysis, employing es ablished econome ic
echniques o assess he impac o mac oeconomic a iables on s ock ma ke ola ili y ac oss
selec ed ma ke s.
TOOLS FOR DATA COLLECTION
Seconda y Da a
The esea ch elies en i ely on seconda y da a, which o e s a cos -e ec i e and ime-
e icien me hod o da a collec ion. Seconda y da a is sou ced om epu able and c edible
publica ions, including:
Go e nmen and cen al bank epo s
Publica ions om in e na ional inancial ins i u ions (e.g., IMF, Wo ld Bank)
Financial da abases such as Bloombe g, Reu e s, Yahoo Finance, and NSE/BSE
eco ds
Academic jou nals and p e ious esea ch s udies
Economic indica o s published by o icial s a is ical agencies
The use o seconda y da a ensu es access o eliable, la ge-scale da ase s necessa y o
conduc ing ime-se ies analysis and s a is ical modeling.
SCOPE OF THE STUDY
1. Global Economic Fac o s
This s udy examines a b oad ange o global economic a iables ha ha e he po en ial o
in luence s ock ma ke ola ili y. These include key mac oeconomic indica o s such as G oss
Domes ic P oduc (GDP) g ow h, in la ion a es, in e es a es, exchange a es, and o e all
inancial ma ke condi ions.
In e na ional Jou nal o Resea ch in Managemen ISSN 2249-5908
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DOI: 10.5281/zenodo.17724646
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2. S ock Ma ke Vola ili y
The p ima y ocus o he s udy is on s ock ma ke ola ili y, de ined as he deg ee o
luc ua ion o a iabili y in s ock p ices o e a speci ic pe iod.
3. His o ical Da a Analysis
The esea ch elies on his o ical da a o explo e he ela ionship be ween global economic
indica o s and s ock ma ke ola ili y. This app oach enables he iden i ica ion o ends and
pa e ns o e ime.
4. S a is ical Analysis
Ad anced s a is ical echniques we e applied o analyze he collec ed da a. These me hods
we e used o e alua e he s eng h and signi icance o he ela ionship be ween selec ed
economic ac o s and s ock ma ke ola ili y.
LIMITATIONS
1. Da a Limi a ions
The indings o his s udy a e highly dependen on he a ailabili y, accu acy, and eliabili y o
his o ical da a. Any inconsis encies o gaps in he da a may a ec he alidi y o he esul s.
2. Causali y and Re e se Causali y
De e mining he di ec ion o causali y poses a challenge. While economic ac o s may
in luence s ock ma ke ola ili y, i is also possible ha ma ke ola ili y a ec s hese
economic indica o s. Addi ionally, omi ed a iables no included in he model could
in luence he obse ed ela ionships.
3. Model Assump ions
The s a is ical models used in he s udy a e based on speci ic assump ions. De ia ions om
hese assump ions could impac he accu acy, eliabili y, and gene alizabili y o he esul s.
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FINDINGS
1. S ong In luence o Mac oeconomic Indica o s:
Global economic ac o s such as GDP g ow h, in la ion, in e es a es, and exchange a es
ha e a signi ican impac on s ock ma ke ola ili y.
2. Nega i e Co ela ion Be ween GDP G ow h and Vola ili y:
Pe iods o s ong GDP g ow h end o be associa ed wi h lowe ma ke ola ili y due o
inc eased in es o con idence and s able co po a e pe o mance.
3. Posi i e Co ela ion Be ween In la ion and Vola ili y:
Rising in la ion leads o unce ain y o e u u e in e es a e policies and cos p essu es o
companies, esul ing in highe s ock ma ke luc ua ions.
4. In e es Ra e Hikes Inc ease Vola ili y:
Changes in global in e es a es, especially unexpec ed hikes, c ea e unce ain y in capi al
ma ke s, leading o inc eased ola ili y as in es o s adjus hei po olios.
5. Exchange Ra e Vola ili y A ec s Eme ging Ma ke s Mo e:
Cu ency luc ua ions ha e a mo e p onounced impac on eme ging s ock ma ke s due o
hei dependency on o eign ade and in es men .
6. Ma ke Sen imen Reac s Quickly o Global E en s:
Geopoli ical ensions, economic c ises, and in e na ional policy shi s cause immedia e and
o en sha p changes in s ock ma ke ola ili y.
SUGGESTIONS
1. Fo In es o s:
Moni o global mac oeconomic indica o s egula ly o an icipa e po en ial ma ke
ola ili y.
Di e si y in es men s ac oss sec o s and geog aphies o minimize isk exposu e.
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Use hedging ools (e.g., op ions, u u es) du ing pe iods o expec ed high ola ili y.
2. Fo Policymake s:
Ensu e imely and anspa en communica ion o mone a y and iscal policies o
educe unce ain y in he ma ke s.
P omo e economic s abili y h ough sus ainable g ow h and in la ion con ol o
educe ma ke dis up ions.
S eng hen mac oeconomic undamen als o educe sensi i i y o ex e nal shocks.
3. Fo Regula o s and Exchanges:
Implemen ola ili y con ol mechanisms such as ci cui b eake s and ma ke
su eillance ools.
Encou age inancial educa ion o help e ail in es o s make in o med decisions in
ola ile condi ions.
4. Fo Resea che s:
Fu u e s udies can ocus on speci ic sec o -wise ola ili y pa e ns o include
beha io al ac o s in luencing ma ke eac ions.
Conside he impac o eme ging echnologies (e.g., algo i hmic ading, AI) on
ola ili y du ing economic shi s.
SUMMARY AND CONCLUSIONS
The Indian S ock Exchange is ecognized as one o he as es -g owing s ock ma ke s among
eme ging economies. This s udy has examined he na u e o s ock ma ke ola ili y a h ee
le els—ma ke , indus y, and i m—using a disagg ega ed app oach o be e unde s and
he unde lying componen s o ola ili y in he Indian con ex .
The analysis employed he me hodology de eloped by Campbell e al. (2001), which p o ides
a s uc u ed amewo k o decomposing o al ola ili y. This app oach o e s wo majo
ad an ages. Fi s , i uses ealized mon hly ola ili y cons uc ed om daily s ock e u n da a,
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making ola ili y obse able a he han elying on complex models o es ima e la en
a iables. Second, i allows o he examina ion o ola ili y o e ime using s anda d
econome ic echniques.
By summing he indi idual ola ili y con ibu ions om he ma ke , indus y, and i m le els,
he o al ola ili y o a ep esen a i e i m is de i ed. This decomposi ion me hod elimina es
he need o calcula ing be a coe icien s o co a iance e ms, simpli ying he analysis while
main aining i s obus ness.
The indings o he s udy unde sco e he impo ance o unde s anding he sepa a e
in luences o b oade ma ke mo emen s, indus y-speci ic dynamics, and i m-le el ac o s
on o e all s ock ola ili y. This disagg ega ed iew p o ides deepe insigh s o in es o s,
analys s, and policymake s aiming o assess isk and make in o med decisions in inc easingly
ola ile ma ke s.
BIBLIOGRAPHY AND REFERENCES
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La in Ame ica. Manage ial and Decision Economics, 20(2), 63–74.
2. Aga wal, M., & Ba ua, B. (1999). In la ion: A s udy wi h espec o India. Finance India,
13(2), 381–401.
3. Amadeo, K. (2012). Wha a e in e es a es and how do hey wo k? Re ie ed om
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