Macroeconomic Variables Of The Stock Market

Market return is obtained from Exhibit 4, S&P 500 Composite Stock Index Returns of 1926 – 1987 which was 9.90%. the assumption of selecting the returns covering the period 1926- 1987 as this period is long enough to consider various phases of economic and business life cycle that took place during the period and will match the risk free rate under the period of consideration (1926 – 1987)

Stock markets generally reflect the economic conditions of an economy, Alfaro, Chanda, Kalemli-Ozcan, & Sayek (2004). If an economy is growing then output will be increasing and most firms should be experiencing increased profitability. This higher profit makes the company shares more attractive – because they can give bigger dividends to shareholders. If the economy is forecast to enter into a recession, then stock markets will generally fall. This is because a recession means lower profits, less dividends and even the prospect of firms going bankrupt, which would be bad news for shareholders.

The stock market heavily influences the strength of an economy. The new president’s plans for the American economy have prompted investors to start buying and investing again. According to USA Today, the “Trump Rally” was what put the Dow Jones average back on track.

In this paper, we will be using the log-log model. The log-log model used for the demand for wealth (attuned for inflation). We will be using the M1, as a display, for demand on wealth and interest rate as the illuminating variable affecting the demand for wealth. Using the regression, we will study the hypothesis. For this paper, the hypothesis used will talk about the connection between money and the interest rate. The null hypothesis, in this case, will be the interest affecting the demand for money in the economy. The data that we will be reviewing is from October 2008 to October 2011, 3 years worth of data. This connection will give us the basic understanding of the performance of the monetary policy in US economy after the crisis.

The United States stock market has experienced many interesting events this year, testing the nerves of millions of people around the world. The market started the year with the worst two-week performance in its history, creating a lot of uncertainty for the year to come. A severe decline in oil prices caused many firms within the energy industry to suffer. However, despite these negative events, gold saw its best quarter in 30 years, the market had a large reversal, and oil has been recovering. These volatile movements provided an amazing opportunity to make money for investors, relief for those who had holdings during this time, and a better outlook for firms. Two firms that have had an interesting year so far are ExxonMobil Corp. and Apple Inc. Exxon has experienced the effects of macroeconomic variables, while Apple has had some internal issues that lead to some stock price fluctuations.

The stock market in the United States is run so anyone can view the trades, their values and no information is hidden. Compared to the stock market, the bond market is run behind closed doors causing problems in the economy. The difference between the two markets became more understood during the Great Recession. When the unethical ways of individuals in the selling of bonds caused corruption that contributed to the recession, many people were hit by the repercussions of the selfish actions. Selling the bonds to people who weren 't in good financial situations became a normal action which cheated many individuals out of money. The bond market would be better off being transparent parallel to the stock market because less people would

The US economy is made up of approximately 2/3 (68.7% to be exact) by consumer spending. Therefore, any significant change in GDP usually has a substantial effect on the stock market. When an economy is healthy and expanding, it is anticipated that businesses will report better earnings and growth. This will create a positive effect for the US stock markets in a bullish manner. At the same time, lower GDP measurements can have the opposite effect on stock prices as businesses begin to suffer. This lower GDP will have a negative effect on the US stock market in a bearish manner.

A macroeconomic item (or factor) may be generally categorized as anything that influences the direction of a particular large-scale market (Investopedia, n.d.). For this analysis, the macroeco-nomic factor shall be interest rate (i.e. discount rate). The following sections that scrutinize the implications of changes to interest rates to the Company’s Present Value* (PV), based on its Free Cash Flows* (FCF); discuss the impact of an issue within the overall stock market on the Com-pany’s stock valuation numbers, other financial variables, or its overall portfolio management; and analyze and discuss the impact of an external factor to the Company.

Moreover, with this extra cash and optimism, consumers will invest enormously. The stock market will reach record breaking highs. The stock market is a clear economic indicator of how well the U.S economy is doing and enhances economic growth in and of

The stock markets have had an enjoyable ride higher since the election. The S&P 500 stock market index has advanced over 10% since then. The stocks markets have recently reached all-time highs and it is understandable that investors want to be more aggressive. Most of this recent market advance is based upon the belief that the new administration will pursue policies which are favorable to corporate America.

In Chapter 12 of the General Theory of Employment, John Maynard Keynes focused on examining the stock market and how it functions, in the sense of its structure and how it is affected by the behavior of investors because he believed the behavior of the stock market affects the aggregate demand, hence the rest of the economic system. He is most interested in the fluctuations of the rates of investments in the stock market that consequently affect

However, while these measures are important, it wouldn’t be prudent to make longer-term investment decisions based on a few statistical measures alone. We need to consider overall investor sentiment and broader economic trends, as well as global markets. Regardless of the magnitude of the recovery going forward, the US will lead the way, in either direction. The graph below illustrates the degree in which major developed markets influenced global real GDP growth over the last several years. The US continues to be the dominant player and we don’t expect that to change anytime soon.

As indicated by the case study S&P 500 index was use as a measure of the total return for the stock market. Our standard deviation of the total return was used as a one measure of the risk of an individual stock. Also betas for individual stocks are determined by simple linear regression. The variables were: total return for the stock as the dependent variable and independent variable is the total return for the stock. Since the descriptive statistics were a lot, only the necessary data was selected (below table.)

The analysis of this paper will derive the validity of the Fama and French (FF) model and the efficiency of the Capital Asset Pricing Model (CAPM). The comparison of the Fama and French Model and CAPM (Sharpe, 1964 & Lintner, 1965) uses real time data of stock market to practise its efficacy. The implication of the function in realistic conditions would justify the utility of the CAPM theory. The theory suggests that the expected return demanded by investors on a risky asset depends on the risk-free rate of interest, the expected return on the market portfolio, the variance of the return on the market portfolio, and

First time this phenomenon was presented by the economists Rajnish Mehra and Edward Prescott in 1985. They discovered that the return from US equity investments in comparison to the return from a risk free government securities had been much far above during the twentieth century to be interpreted by the traditional economic theories (Siegel and Thaler, 1997).