On the Relationship between Financial Returns and Macroeconomic Factors

Lisa Airoldi

affiliation not provided to SSRN

Klaus Spremann

University of St. Gallen; University of St. Gallen - SoF: School of Finance

April 20, 2009

Following the methodology of Chen, Ross, and Roll (1986), we analyze a multi-factor model to explain excess returns of different industry sectors using US-Data 1959-2006. In addition to the market index, we use two macroeconomic factors (industry and consumption growth) to capture different phases of the business cycle. The argument is whether financial investors consider indicators of the early phase of the business cycle (GDP growth) or of the later phases (private consumption), respectively, when they buy or sell stocks. Our findings show: First, the additional explanatory power of the two macroeconomic entities exists but is moderate. Second, the importance of early versus late cyclical indicators depends on the industry sector, and there has also been a shift over time.

Keywords: Multi-factor models, Forecasting asset returns with macroeconomic factors, Business Cycle Phases, US Market, Private Consumption, Gross Domestic Product

JEL Classification: C51 G12

Not Available For Download

Date posted: April 20, 2009  

Suggested Citation

Airoldi, Lisa and Spremann, Klaus, On the Relationship between Financial Returns and Macroeconomic Factors (April 20, 2009). Available at SSRN: http://ssrn.com/abstract=1392109

Contact Information

Lisa Airoldi
affiliation not provided to SSRN ( email )
Klaus Spremann (Contact Author)
University of St. Gallen ( email )
Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
University of Saint Gallen - SoF: School of Finance ( email )
Rosenbergstrasse 52
St.Gallen, CH-9000

Feedback to SSRN

Paper statistics
Abstract Views: 404

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.250 seconds