The Functions, Pricing Determinants, and Macroeconomic Influence of Stocks
Research Article
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The Functions, Pricing Determinants, and Macroeconomic Influence of Stocks

Bicheng Xu 1*
1 University of Toronto
*Corresponding author: owenxu0710@163.com
Published on 11 November 2025
Journal Cover
AEMPS Vol.239
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-525-7
ISBN (Online): 978-1-80590-526-4
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Abstract

Against the backdrop of expanding retail participation, rising passive ownership, and evolving market microstructure, understanding the links between trading, pricing, and the real economy has renewed importance. This review examines how equity markets function, what determines stock prices, and how those prices shape macroeconomic outcomes. The study’s theme is integrative: it synthesizes theory and evidence on four core market functions (price discovery, risk sharing, capital formation and governance, and liquidity provision), organizes pricing determinants across present-value logic, risk-based factor models, and demand- or constraint-driven mechanisms, and traces macroeconomic transmission through household wealth, firm investment, credit conditions, and monetary policy. This study connects canonical models with recent empirical findings and institutional observations, highlighting points of agreement and contention. The significance of this study lies in providing an integrated framework for researchers and policymakers: it clarifies when prices primarily reflect cash-flow news versus pressures driven by discount rates or order flows; it highlights how ownership composition and intermediation capacity shape price impacts; and it identifies practical implications for estimating the cost of capital, designing markets, and monitoring financial stability.

Keywords:

Stocks, Stock Pricing, Risk Sharing, Stock Market

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Xu,B. (2025). The Functions, Pricing Determinants, and Macroeconomic Influence of Stocks. Advances in Economics, Management and Political Sciences,239,1-7.

References

[1]. Fama, E. F. (1970) Efficient capital markets: A review of theory and empirical work. Journal of Finance, 25: 383-417.

[2]. Kyle, A. S. (1985) Continuous auctions and insider trading. Econometrica, 53: 1315-1335.

[3]. Shiller, R. J. (1981) Do stock prices move too much to be justified by subsequent changes in dividends? American Economic Review, 71: 421-436.

[4]. Campbell, J. Y., Lo, A. W., MacKinlay, A. C. (1997) The Econometrics of Financial Markets. Princeton University Press, Princeton.

[5]. Fama, E. F., French, K. R. (2015) A five-factor asset pricing model. Journal of Financial Economics, 116: 1-22.

[6]. Hou, K., Mo, H., Xue, C., Zhang, L. (2021) An augmented q-factor model with expected growth. Review of Finance, 25: 1-51.

[7]. Gabaix, X., Koijen, R. S. J. (2021) In search of the origins of financial fluctuations: The inelastic markets hypothesis. Quarterly Journal of Economics, 136: 1669-1726.

[8]. Pastor, Ľ., Stambaugh, R. F., Taylor, L. A. (2021) Sustainable investing in equilibrium. Journal of Financial Economics, 142: 550-571.

[9]. Hayashi, F. (1982) Tobin’s marginal q and average q: A neoclassical interpretation. Econometrica, 50: 213-224.

[10]. Bank for International Settlements (BIS), 2023. Annual Economic Report 2023 (chapters on financial markets and intermediation). https: //www.bis.org/publ/arpdf/ar2023e.htm

[11]. International Monetary Fund (IMF), 2022. World Economic Outlook (October 2022), Chapter 2: Private Sector Wealth. https: //www.imf.org/en/Publications/WEO

[12]. Organisation for Economic Co-operation and Development (OECD), 2023. Equity markets, firm financing and growth—Policy perspectives. https: //www.oecd.org/finance/

[13]. World Bank, 2024. Market capitalization of listed domestic companies (current US$). https: //data.worldbank.org/indicator/CM.MKT.LCAP.CD

References

[1]. Fama, E. F. (1970) Efficient capital markets: A review of theory and empirical work. Journal of Finance, 25: 383-417.

[2]. Kyle, A. S. (1985) Continuous auctions and insider trading. Econometrica, 53: 1315-1335.

[3]. Shiller, R. J. (1981) Do stock prices move too much to be justified by subsequent changes in dividends? American Economic Review, 71: 421-436.

[4]. Campbell, J. Y., Lo, A. W., MacKinlay, A. C. (1997) The Econometrics of Financial Markets. Princeton University Press, Princeton.

[5]. Fama, E. F., French, K. R. (2015) A five-factor asset pricing model. Journal of Financial Economics, 116: 1-22.

[6]. Hou, K., Mo, H., Xue, C., Zhang, L. (2021) An augmented q-factor model with expected growth. Review of Finance, 25: 1-51.

[7]. Gabaix, X., Koijen, R. S. J. (2021) In search of the origins of financial fluctuations: The inelastic markets hypothesis. Quarterly Journal of Economics, 136: 1669-1726.

[8]. Pastor, Ľ., Stambaugh, R. F., Taylor, L. A. (2021) Sustainable investing in equilibrium. Journal of Financial Economics, 142: 550-571.

[9]. Hayashi, F. (1982) Tobin’s marginal q and average q: A neoclassical interpretation. Econometrica, 50: 213-224.

[10]. Bank for International Settlements (BIS), 2023. Annual Economic Report 2023 (chapters on financial markets and intermediation). https: //www.bis.org/publ/arpdf/ar2023e.htm

[11]. International Monetary Fund (IMF), 2022. World Economic Outlook (October 2022), Chapter 2: Private Sector Wealth. https: //www.imf.org/en/Publications/WEO

[12]. Organisation for Economic Co-operation and Development (OECD), 2023. Equity markets, firm financing and growth—Policy perspectives. https: //www.oecd.org/finance/

[13]. World Bank, 2024. Market capitalization of listed domestic companies (current US$). https: //data.worldbank.org/indicator/CM.MKT.LCAP.CD

Cite this article

Xu,B. (2025). The Functions, Pricing Determinants, and Macroeconomic Influence of Stocks. Advances in Economics, Management and Political Sciences,239,1-7.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICFTBA 2025 Symposium: Data-Driven Decision Making in Business and Economics

ISBN: 978-1-80590-525-7(Print) / 978-1-80590-526-4(Online)
Editor: Lukášak Varti
Conference website: https://2025.icftba.org/Bratislava.html
Conference date: 12 December 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.239
ISSN: 2754-1169(Print) / 2754-1177(Online)

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