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ook out the monthly time-series of property indices in Singapore. Humpe and Macmillan (2007) also found American’s data which is consistent with a single cointegrating vector, where stock prices are negatively related to a interest rate.

According to Prantik and Vani (2003), which is the researcher strongly agree that there has been a consistent relationship between certain variables like interest rate with stock price. The researcher believed that the real economic variables continue to affect the stock market in the post-reform era in India but highlight the insignificance of certain variables with respect to stock market.

Adam and Tweneboah (2008) studied the role of macroeconomic variables in stock market movement during period of January 1991 to December 2006. The researchers indicate that interest rate is the key determinant of the share price movements in Ghana. The researcher suggest that based on the result, potential investors should pay more attention to interest rate

2.3 Money supply

Many previous result suggest that stock market is informational efficient with respect to money supply. Habibullah and Baharumshah (1996) found that money supply is important in predicting stock prices in Malaysia using both M1 and M2 to represent the money supply. The trivariate cointegration analysis suggests that stock price index and macroeconomic variables in particular money supply are not cointegrated. The researcher believes that stock price index has already incorporated all past information on money supply (M1 and M2).

Rahman et al (2009) found that the government should be cautious with how money supplies are managed since they have influenced the stock price. This study examines the factors that affect the Malaysian stock market from the macroeconomic perspective, the researcher found out the monetary policies variables (proxy by money supply) have significant long run effects on Malaysia’s stock market.

Maysami et al (2004) urged that money supply has nothing to do with the performance of Singapore’s stock market specifically, for the SES All-S Equities Finance Index. The researchers examine the long-term equilibrium relationships between selected macroeconomic variables including money supply and the Singapore stock market index (STI), as well as with various Singapore Exchange Sector indices—the finance index, the property index, and the hotel index.

Agrawalla (2005) found that money supply (M3) is significant at 1% level of confidence in manufacturing of textile, wear and paper industry, manufacturing of food beverage and tobacco respectively. Using January 2001 to September 2005 monthly data the researcher believe that macroeconomic factors have not significant effect on stock returns in Istanbul Stock.

Using a data from equity prices for the period 1998 to 2008 Pakistani capital market reveal that money supply have significant long run effect on equity prices (Hasan and Nasir, 2008). This study facilitates the investors in taking effective investment decisions as by estimating the expected trends in money supply (M3) and, they can estimate the future direction of equity prices and can allocate their resources more efficiently.

2.4 Inflation

The relationship between equity market returns and inflation has been used to investigate in developed markets. Hasan and Nasir (2008) shows t