Abstract:
The study analysed macroeconomic drivers of stock market performance for the preand
during the COVID-19 period. The aim was attained by formulating two models,
the pre-and during the COVID-19 models. The study used the Vector Error Correction
Model (VECM) to determine how macroeconomic drivers such as, economic growth,
exchange rate fluctuations, and stock market liquidity influenced the JSE stock price
index during these two distinct time frames. The results revealed that the turnover ratio
has a role, exchange rates have complex dynamics, and GDP sensitivity changes.
During pre-COVID-19, positive short-term correlations between GDP growth and stock
prices were evident, while exchange rate fluctuations exhibited transitory effects. In
contrast, the COVID-19 period model unveiled a muted response to GDP, increased
sensitivity to exchange rate shocks, and a heightened influence of the turnover ratio
in sustaining market stability. This study adds to the understanding of the behaviour
of the South African stock market and provides a methodological framework for future
research on the intricate interactions between financial markets and macroeconomic
drivers.
