The Impact of Inflation, GDP, Unemployment, and Money Supply On Stock Prices

Abstract:     
Knowledge of stock price behavior is very important for investor. This price is influenced by a number of factors in the financial market. Four of the most important factors that affect the stock price are; inflation, GDP, unemployment, and money supply. This paper shows the different effects of; inflation, GDP, unemployment, and money supply on stock price of industrial sector. To examine the different sensitivity of stocks according to what sector it belongs to. The study is done on New York exchange. Chose indefinite companies, from the sector we mentioned, and take CPI as an example of inflation, because it is the closet to the investor decision. We get our data (the rate of CPI and the GDP –M1 & money supply) from Federal Reserve web site; during the period 1994-2007 .The findings show according to our samples that, the four independent variables have different effects on this sector. The strongest variable effect among our collection was money supply; it has a strong positive influence at most companies in our sample. The second variable was CPI as for inflation, and unemployment, both have a weak influence on most companies.

Number of Pages in PDF File: 58

Keywords: Inflation, GDP, Unemployment, Money Supply, Stock Prices

JEL Classification: C1, B4, C32

working papers series