How Do Stock Returns on the U.S. Manufacturing Industry Respond to Raw Materials Price Shock?

9 Pages Posted: 29 Aug 2012 Last revised: 24 Jun 2013

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: August 28, 2012

Abstract

This paper analyses how stock returns on the U.S. manufacturing industry respond to raw materials price shock. Using monthly excess return data of the U.S. manufacturing industry and the percentage change of the U.S. raw materials price commodity index from 1960:M2 to 2012:M12, the vector auto regression (VAR) analysis shows that excess returns on the manufacturing industry are positive in the first few months following raw materials commodity price shock. The excess returns then negatively respond to the price shock in the seventh month (after two quarters). The variance decomposition and the Wald causality tests are also estimated.

Keywords: stock returns, manufacturing, raw materials, commodities

JEL Classification: G10, G12, G14

Suggested Citation

Sum, Vichet, How Do Stock Returns on the U.S. Manufacturing Industry Respond to Raw Materials Price Shock? (August 28, 2012). Available at SSRN: https://ssrn.com/abstract=2137442 or http://dx.doi.org/10.2139/ssrn.2137442

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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