This paper examined interactions between stock price and key macroeconomic variables over the period of 1975-1992. It has been found that more than 60% of real stock price changes can be well explained by movements in key macroeconomic variables, particularly in net exports and industrial production. On the other hand, real stock price changes were found to have a significant explanatory power for plant and equipment investments for the sample period of 1975-1985 during which the stock market was stable. In contrast, no significant linkage between stock price changes and investments emerged over the subsample period of 1986-92 despite the sharp expansion of the stock market in terms of trade volume. Based on such findings, two major policy implications were derived; (i) the government's intervention in the stock market to stabilize stock prices would be ineffective unless the stable economic growth supports the market fundamental, and (ii) the stock price stability is a precondition for the stock market to play a key role in mobilizing resources to finance the firm's long-term capital.