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Abstract

The stock market represents a fundamental cornerstone of the financial system in contemporary economic structures, given its pivotal role in mobilizing domestic savings and channeling them into investment avenues that bolster the national economy and enhance economic welfare. Furthermore, it serves as a reflection of the overall economic climate. Due to the intrinsic link between the stock market and the economy, the stability and growth of these markets are considered benchmarks for the success of public economic policies, while their performance indicators are viewed as effective tools for identifying economic activity trends. This study examines the external (economic and political) and internal factors influencing the behavior of financial markets. It analyzes key macroeconomic variables—namely money supply, the level of economic activity, interest rates, exchange rates, and inflation—and their relationship with stocks and bonds, while identifying the channels through which these variables impact the stock market. Additionally, the research investigates internal technical factors arising within the exchange, particularly those related to market practices, the nature of transactions, and the behaviors of market participants. It highlights how certain traders and brokers may create artificial conditions to mislead investors. Consequently, the study reviews legislation and regulations designed to curb illegal practices and foster a stable investment environment. Focusing on the Egyptian Exchange (EGX), the study quantitatively tests the relationship between the aforementioned economic factors and market performance indicators (Price Index, Market Capitalization, and Trading Volume). The findings reveal a positive correlation between changes in money supply, economic activity, and inflation rates with the performance indicators of the Egyptian market. Conversely, interest and exchange rates were found to have an inverse relationship with these indicators. Finally, the study recommends the establishment of active information centers within stock markets to provide investors with timely data on central bank monetary policy measures, enabling them to make informed trading decisions. Moreover, monetary authorities must balance the benefits and adverse effects of their decisions on market performance. To mitigate illegal practices, the study emphasizes the importance of enacting robust regulatory frameworks to protect the market from fraud and manipulation by major brokers and investors at the expense of other market participants.

DOI

10.33095/jeas.v13i45.1147

Subject Area

Economics

First Page

105

Last Page

111

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