| The purpose of this quantitative research was to examine the degree of association between stock returns in Morocco and selected economic variables including Gross Domestic Product, interest rate, inflation rate, stock returns in the United States, and stock returns in Europe. The proposed study used the multifactor model to ascertain the degree of correlation between stock returns in Morocco and each economic variable, and stock returns and domestic factors (GDP, interest rate, and inflation rate) grouped together, and stock returns and global factors (stock returns in the United States and Europe) grouped collectively. The problem addressed in this study was that international investors, policy makers, and institutional investors in Morocco do not have significant insights into the relationship between stock returns in Morocco and economic activity and the degree of integration of the Moroccan equity market with global markets. This research used a non-experimental correlational design to study the relationship between stock returns of all publicly traded companies on the Moroccan stock market between 2000 and 2014 and the selected macroeconomic variables. The data set was analyzed using correlation analysis and multiple regression analysis. It was found that a significant long run positive relationship existed between stock returns in Morocco and GDP growth rate and inflation rate. No statistically significant relationship was found between stock returns in Morocco and interest rate, stock returns in the U.S., and stock returns in Europe. Collectively domestic variables accounted for 6% of the variation in stock returns (R2= 0.06, F(3,166) = 3.501, p < 0.05). Global factors accounted for 0.7% on variation in stock returns and were statistically insignificant (R 2 = 0.007, F(2,167) = 0.620, p > 0.05). Results from combined domestic and global factors indicated a significant regression model that could explain 7% of the total variation in stock returns in Morocco (R2= 0.07, F(5,164) = 2.479; p < 0.05). Recommendations for future research included the inclusion of more explanatory variables, both domestic and global, in the analysis of stock returns and the study of the relationship between the selected economic variables and sector-specific indices. |
