Real Macro Economic Variables and Stock Prices : Test of Proxy Hypothesis in Turkey

The aim of this study is to investigate the relationship between reel macroeconomic variables and stock prices in Turkey under quot;Proxy hypothesisquot; developed by Fama (1981). According to Proxy hypothesis of Fama, real macroeconomic variables such as consumption expenditures, economic growth, employment, fixed investment affect stock prices via inflation. In the study, consumption expenditures, industrial production index, employment level and fixed investments are used as indicators of real economic activity and consumption price index as indicator of inflation. The long-run relationship between the variables is tested by Bound testing approach developed by Paseran et al (2001). Our findings support the validity of the Proxy Hypothesis of Fama (1981) for Turkey