Macroeconomic Determinants of Capital Market & Market Capitalization in South Asia : A Panel Regression Analysis (2010-2019)

This research paper focuses on investigating the macroeconomic determinants of capital market performance in South Asia, using the Arbitrage Pricing Theory and multiple panel regression for the period of 2010-2019.While previous studies have explored the impact of macroeconomic variables on the stock marketperformance, this research aims to fill a gap in the literature by examining the effects on the entire capital market, including non-stock components such as bonds and money market instruments. The analysis emphasizes the importance of considering the broader capital market to gain a more comprehensive understanding of the factors influencing its performance.The results indicate that GDP has a significant positive impact on capital market performance in South Asia. However, the depreciation of the exchange rate, real interest rate, and inflation rate have an insignificant negative impact on the capital market. These findings suggest that a stable and growing economy may positively influence capital market performance, whereas unstable macroeconomic conditions may not necessarily have a significant impact on the capital market.Furthermore, this study highlights the need for long-run time series and country-wise analysis to provide a more detailed understanding of the mechanism driving the relationship between macroeconomic variables and capital market performance. Such analysis can help policymakers and investors make informed decisions based on a more comprehensive understanding of the factors influencing capital market performance in South Asia.Overall, this research contributes to the existing literature by offering a broader perspective on the determinants of capital market performance in South Asia, and providing insights that can help policymakers and investors navigate the complex relationship between macroeconomic variables and the capital market