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.
Table of Content
List of Tables
Abstract
1 Introduction
2 Applied Macroeconomic Time Series Data Source
2.1 Standard & Poor’s 500 Index
2.2 Stock Prices and Industrial Production Index
2.3 Stock Return and M1 Money Stock
2.4 Stock Return and Total Consumer Credit Outstanding
2.5 Stock Return and Term Structure of Interest Rates
2.6 Stock Return and Consumer Price Index
3 The Expected Outcome of Regressors
4 Analysis of Test Results
4.1 Stationarity and Weak Dependence
4.2 Testing for Time Trend and I(1) process
4.3 Lagged Variables
4.4 Multicollinearity
4.5 Model Re-Specification
4.6 Regression Results
4.6.1 CPI
4.6.2 IPT
4.6.3 Money Stock M
4.6.4 TCC
4.6.5 Term
5 F-Test
6 Serial Correlation
7 Testing for Heteroskedasticity
8 Model Re-Specification
8.1 Using Robust-Standard Errors
8.2 Omitting all Insignificant Variables
9 Conclusion
Bibliography
Appendix
- Quote paper
- Dennis Sauert (Author), 2010, Do Macroeconomic Variables have an Effect on the US Stock Market?, Munich, GRIN Verlag, https://www.grin.com/document/158131
-
Upload your own papers! Earn money and win an iPhone X. -
Upload your own papers! Earn money and win an iPhone X. -
Upload your own papers! Earn money and win an iPhone X. -
Upload your own papers! Earn money and win an iPhone X. -
Upload your own papers! Earn money and win an iPhone X. -
Upload your own papers! Earn money and win an iPhone X. -
Upload your own papers! Earn money and win an iPhone X.