A GARCH Examination of Macroeconomic Effects on U.S. Stock Market: A Distinguish between the Total Market Index and the Sustainability Index

Abstract

The paper examines the impact of several macroeconomic variables on the Dow Jones Sustainability and Dow Jones Wilshire 5000 (U.S.) indexes, using a GARCH model and monthly data for the period January, 2000 to January, 2008. The results show that changes in returns in crude oil prices affect negatively the U.S. stock market contrary to changes in returns of the 10 year bond value that affect it positively. Both economic indicators influence the DJSI U.S. with a month delay. Also, the exchange rate volatility affects negatively the returns of the U.S. stock market and the non-farm payroll can be characterised as a stabilising factor for the Dow Jones Sustainability index.

Keywords: Corporate Social Responsibility, Dow Jones Sustainability Index of United States, GARCH model, macroeconomic indicators

JEL Classification: G12, G15, C30