Policy makers, for example, should feel free to conduct national macroeconomic policies without the fear of influencing capital formation and the stock trade process. Moreover, economic theory suggests that stock prices should reflect expectations about future corporate performance, and corporate profits generally reflect the level of economic activities. If stock prices accurately reflect the underlying fundamentals, then the stock prices should be employed as leading indicators of future economic activities, and not the other way around. Therefore, the causal relations and dynamic interactions among macroeconomic variables and stock prices are important in the formulation of the nation’s macroeconomic policy
