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Abstract
This study investigates the empirical relationship between macroeconomic volatility—specifically interest rate, inflation, and money supply—and stock market return in Nepal, represented by the NEPSE index. The primary purpose is to determine how these macroeconomic variables influence stock market performance in an emerging economic context. Employing a descriptive and causal research design, the study utilizes monthly time-series data from 2015 to 2023, with variables operationalized using the 91-day treasury bill rate (interest rate), consumer price index (inflation), and broad money supply (M2). Statistical analyses, including correlation and multiple regression, reveal that interest rates have a significant negative impact on stock market returns, while money supply shows a small but significant positive effect. Inflation demonstrates a weak and statistically
insignificant influence. The model's explanatory power is limited, accounting for only 11.3% of the variation in stock returns, suggesting other non-economic factors may also play a role. The study concludes that while certain macroeconomic variables significantly influence NEPSE returns, overall stock market behavior in Nepal remains partially explained by these factors, highlighting the importance of considering broader economic and investor sentiment dynamics. These findings hold practical implications for policymakers, investors, and financial institutions aiming to enhance market stability and efficiency. Keywords: Macroeconomic Volatility, Stock Market Return, Interest Rate, Money Supply, Nepal Stock Exchange (NEPSE).