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Author: Chris Bilson
Publisher:
ISBN:
Category :
Languages : en
Pages : 30
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Book Description
Emerging stock markets have been identified as being at least partially segmented from global capital markets. As a consequence, it has been argued that local risk factors rather than world risk factors are the primary source of equity return variation in these markets. This paper seeks to address the question of whether macroeconomic variables may proxy for local risk sources. We find moderate evidence to support this hypothesis. Further, we investigate the degree of commonality in exposures across emerging stock market returns using a principal components approach. We find little evidence of commonality when emerging markets are considered collectively, however at the regional level considerable commonality is found to exist.
Author: Chris Bilson
Publisher:
ISBN:
Category :
Languages : en
Pages : 30
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Book Description
Emerging stock markets have been identified as being at least partially segmented from global capital markets. As a consequence, it has been argued that local risk factors rather than world risk factors are the primary source of equity return variation in these markets. This paper seeks to address the question of whether macroeconomic variables may proxy for local risk sources. We find moderate evidence to support this hypothesis. Further, we investigate the degree of commonality in exposures across emerging stock market returns using a principal components approach. We find little evidence of commonality when emerging markets are considered collectively, however at the regional level considerable commonality is found to exist.
Author:
Publisher:
ISBN:
Category : Capital assets pricing model
Languages : en
Pages :
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Book Description
Author: Patrick B. Baghdasarian
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Book Description
This paper examines the effects of macroeconomic variables on the returns of a broad cross-section of emerging stock markets (ESMs) for a relatively recent time period. Specifically, the paper examines the quarterly data of select local and global macroeconomic variables for 9 ESMs over the period 2002-09 using the same methodology that was applied in Fifield et al. (2002) on similar sets of data. Applying the methodology used in Fifield et al. (2002) we find that the local economic variables included in the study can be summarized by net exports, interest rates, and currency, while global variables can be summarized by world-market returns and US interest rates. The paper uses principal component analyses (PCA) to reduce the number of the variables. The principal components (PCs) are then selected by way of ad hoc rules-of-thumbs. A scree test is then applied in conjunction with an analysis of the acceleration factors of each scree plot to provide robustness. Essentially, a minimum of 0.5173 to a maximum of 0.7775 of the variation can be explained by the first PC, while approximately 0.76 to 0.95 of the cumulative variance can be explained by both the first and second PC. We retain the first and second PCs; thus, we can reduce the dimensionality of the variables from six to two variables. The retained PCs are used as inputs into two regression analyses in order to explain the variation of index returns within each of the 9 ESMs over the period 2002-09. The first regression analysis only includes PCs retained that contain global macroeconomic variables, while the second includes both the PCs that contain global macroeconomic variables as well as PCs that contain information at the local level or local macroeconomic information. The R2 and adj. R2 of each regression analysis was compared for robustness. The regression analysis indicates that while global factors are consistently significant with a high degree across the cross-section of ESMs when both the first and second recession analysis is investigated, local factors, do not show consistent significance across the cross-section of ESMs when the second regression analysis is investigated. Additionally, we use the retained global and local PCs as inputs for a third regression analysis in which the residuals of the first model are used as an input for the dependent variable in order to make sure the improvement in the R2 and adj. R2 between the first and second regression analysis are attributed to a robustness versus general improvements of R2 and adj. R2 due to adding additional variables. After examining the R2 and adj. R2 we find that although the first regression analysis has a relatively higher R2 and adj. R2 compared to the second linear mode the first linear model does not provide a high enough R2 or adj. R2. Essentially, both linear models lack predictive prowess because Additionally, the second linear model does not show much improvement to the first when we add additional explanatory variables. This was validated when we examined the R2 and adj. R2 of the third linear model as both variables were significantly lower than the R2 and adj. R2 of the first model. Furthermore, for certain ESM the variance among local variable show a degree of significance, but they do not show the same high degree of significance as compared to the level of significance indicated by the global macroeconomic variables. Finally, cross-validation (CV) was applied to both models. We find that for the ESM that had significant local variables for some & alpha; the second model had a lower mean squared error (MSE) compared to the MSE of the first model.
Author: Dennis Sauert
Publisher: GRIN Verlag
ISBN: 3640720210
Category : Business & Economics
Languages : en
Pages : 27
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Book Description
Seminar paper from the year 2010 in the subject Economics - Case Scenarios, grade: 1.0, Berlin School of Economics, language: English, abstract: The objective of this paper is to examine whether the unanticipated change of specific macroeconomic variables influences the US stock market represented by the S&P 500 using monthly data from 1986 to 2007. Thereby, the performance of the arbitrage pricing theory of Ross (cp. Ross, S., 1976) shall be studied. To explain the behavior of the US stock market return the paper contains the five predefined variables consumer price index (CPI), industrial production index (IPT), money stock M1 (M1), total consumer credit outstanding (TCC) and the term structure of interest rates (Term) which are approximately similar to those variables used by Ross (cp. Chen N. F. et al., 1986, pp. 383-403). Applying the OLS method, it was found that CPI, IPT and Term are negatively related to the US stock return. It was also detected that M1 affects the stock market lagging 8 months and 12 months. However, the test statistics showed that TCC has rather no impact on the US stock market return. To ensure that the ultimate results are not spurious, care will be taken in regards to autocorrelation, multicollinearity, serial correlation as well as heteroskedasticity.
Author: Dennis Sauert
Publisher: GRIN Verlag
ISBN: 3640720652
Category : Business & Economics
Languages : en
Pages : 29
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Book Description
Seminar paper from the year 2010 in the subject Economics - Case Scenarios, grade: 1.0, Berlin School of Economics, language: English, abstract: The objective of this paper is to examine whether the unanticipated change of specific macroeconomic variables influences the US stock market represented by the S&P 500 using monthly data from 1986 to 2007. Thereby, the performance of the arbitrage pricing theory of Ross (cp. Ross, S., 1976) shall be studied. To explain the behavior of the US stock market return the paper contains the five predefined variables consumer price index (CPI), industrial production index (IPT), money stock M1 (M1), total consumer credit outstanding (TCC) and the term structure of interest rates (Term) which are approximately similar to those variables used by Ross (cp. Chen N. F. et al., 1986, pp. 383-403). Applying the OLS method, it was found that CPI, IPT and Term are negatively related to the US stock return. It was also detected that M1 affects the stock market lagging 8 months and 12 months. However, the test statistics showed that TCC has rather no impact on the US stock market return. To ensure that the ultimate results are not spurious, care will be taken in regards to autocorrelation, multicollinearity, serial correlation as well as heteroskedasticity.
Author: Nisha Nabila
Publisher: LAP Lambert Academic Publishing
ISBN: 9783659812521
Category :
Languages : en
Pages : 88
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Book Description
The impact of macroeconomic variables on stock returns has been the subject of increased theoretical and empirical investigation in literature. This book aims to complement the literature by extending this presumed relationship between stock returns and a set of pre-determined domestic and global macroeconomic variables to the emerging stock markets of Bangladesh and India. Evidence for this relationship is drawn in this study through the research methods of Vector Autoregression and by applying empirical tests like Johansen cointegration and Vector Error Correction Models. Empirical findings of this research will provide further insights into understanding the underlying macroeconomic factors that can significantly impact the stock returns of selected stock markets of both Bangladesh and India. This study can also assist various academicians, researchers, policy makers and particularly the governments of these two developing countries to consider the influence of macroeconomic factors when regulating their stock markets, its returns and its policies.
Author: Swee Sum Lam
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
With increasing globalization, to what extent do stock market returns reflect global or domestic risk factors? We find a significant relationship between stock market returns and the global market risk factor and macroeconomic factors respectively. In particular, global factors offer four times more explanatory power than domestic factors for developed market stock returns. Yet domestic factors are as important as global ones in emerging economies. Our method allows for the proxies of the state variables to be endogenously determined. The relationship between macroeconomy and stock market returns is robust after accounting for the market factor, firm size and book-to-market characteristics.
Author: Jinhai Hu
Publisher:
ISBN:
Category :
Languages : en
Pages : 81
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Book Description
Author: Tarak Nath Sahu
Publisher: Springer
ISBN: 1137492015
Category : Business & Economics
Languages : en
Pages : 247
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Book Description
The liberalization and globalization of the Indian economy has made India more vulnerable to macro issues. This book provides a comprehensive analysis of the dynamic relationship between macroeconomic variables and stock prices in India. The research findings and policy implications discussed here may also be relevant for other emerging economies.
Author: Zopounidis, Constantin
Publisher: IGI Global
ISBN: 1522561153
Category : Business & Economics
Languages : en
Pages : 372
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Book Description
Financial analyses, investments, and accounting practices are continually developing and improving areas that have seen significant advancements in the past century. However, the recent bankruptcies by major banks, the debt crisis in the European Union, and the economic turmoil in several countries have caused severe downfalls in financial markets and financial systems worldwide. As the world works to recover, it is important to learn from these financial crises to ensure a more secure and sustainable outlook for organizations and the global future. Perspectives, Trends, and Applications in Corporate Finance and Accounting is a crucial resource providing coverage on the stock market, public deficits, investment firms’ performances, banking systems, and global economic trends. This publication highlights areas including, but not limited to, the relationship between the stock market and macroeconomics, earnings management, and pricing models while also discussing previous financial crises. This book is a vital reference work for accountants, financial experts, investment firms, corporate leaders, researchers, and policy makers.
