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The influence of macroeconomic variables on stock performance.

Çiftçi, Sadiye (2014) The influence of macroeconomic variables on stock performance.

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Abstract:This study investigates the influence of four macroeconomic variables: crude oil, interest rate, exchange rate and gold, on stock returns of ten U.S. industries. The study uses monthly data from January 1997 to September 2014 and the ordinary least squares approach. The observation period is divided into a pre-crisis and post-crisis period; the period as a whole is also analysed. The findings of this paper demonstrate that the impact of some macroeconomic variables differs between industries, whereas other macroeconomic variables have a homogenous impact. The negative impact of crude oil on stock returns is confirmed for four industries, namely consumer goods, consumer services, financials and healthcare. Due to their nature, the oil and gas sector and the industrials sector are positively influenced by increases in crude oil returns. Not only industries which are oil sensitive, also industries which do not use oil at all are influenced by movements in the crude oil returns. There is no evidence found in this study which suggests that the interest rate affect stock returns. The rise of enhanced tools for managing interest rate risk could be an explanation for this. The third variable, the exchange rate, has a heterogeneous effect on the industries that depend on imports or exports of goods. The technology, consumer goods, consumer services and telecommunication sectors exhibit an increase in stock returns when the domestic currency depreciates. The other industries all present insignificant results for the exchange rate variable. During the pre-crisis period, no relation between gold and stock performance was found for any industry. During the post-crisis period, significantly negative results were found for the consumer services, financials and industrials sectors, which could be a result of a substitution effect from shares to gold.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/66492
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