Multiple Regression Model Essay

2133 Words9 Pages
Project: Multiple Regression Model

Introduction

Today’s stock market offers as many opportunities for investors to raise money as jeopardies to lose it because market depends on different factors, such as overall observed country’s performance, foreign countries’ performance, and unexpected events. One of the most important stock market indexes is Standard & Poor's 500 (S&P 500) as it comprises the 500 largest American companies across various industries and sectors. Many people put their money into the market to get return on investment. Investors ask themselves questions like how to make money on the stock market and is there a way to predict in some degree how the stock market will behave? There are lots and lots of
…show more content…
Decrease in house prices is one of the possible contributors to recession because the home owners lose their equity in their houses. Considering such recession scenario, the stock market always becomes bearish. Additionally, house market is considered more stable investment than stock market. When stock market drops, people are willing in the houses and HPI goes up. We assume that HPI and stock market shouldn’t move in the same direction thereby we don’t take into consideration the complex scenario of 2008.

β4: 10-Year Treasury Constant Maturity Rate impacts on the number of issued bond and is used as risk free rate to calculate the excess return on the investment. It also has an influence on the stock market.

β5: Gross Domestic Product of the US is important for business profit and this can drive the stock prices up. Investing in the stock market seems reasonable when the economy is doing well. If the economy is growing fast then the stock market should be affected positively, the investors are more optimistic about the future and they put more money into market more. This variable is crucial for the dependent one.

β6: Gross Domestic Product of Spain. Since Europe is currently in a recession, we wanted to include the GDP of Spain, as one of the weakest economies in Europe now, to check if there is any relationship between
Get Access