Macroeconomic Factors, the Apt and the Uk Stockmarket

Abstract

This paper examines the macroeconomic sources of risk priced in the UK stockmarket between 1983 and 1990 using monthly data on 840 stocks to form both beta‐sorted and market value sorted portfolios using the methodology proposed by Chen, Roll and Ross (1986) and Chan, Chen and Hsieh (1985) for the US. We find that several intuitively plausible macroeconomic variables were priced over this period using the beta sorted portfolios and that once these variables are included there is little role for the return on the market. However, when the market value sorted portfolios were used only inflation and a measure of equity market ‘expense’ relative to gilts was priced; furthermore with the market value sorted portfolios a role for the market return was found.

The Determinants of Stock Returns in a Small Open Economy

“…As Switzerland does not produce oil, it is forced to import this resource; we assume therefore that oil prices have an impact on the Swiss economy and use the Brent oil index. This is consistent with papers by Chen et al (1986) and Clare and Thomas (1994). Finally, this group of variables also contains the influence of currency markets.…”

“…Yet another approach that has been used is to add a single international variable (exports, a world index or the foreign exchange rate) to a domestic APT model with pre-specified macroeconomic variables. Examples include Martikainen, Yli-Olli and Gunasekaran (1991) for Finland, Kryzanowski and Zhang (1992) for Canada, Clare and Thomas (1994) for the U.K., Kaneko and Lee (1995) for Japan, Groenewold and Fraser (1997) for Australia, and Clare and Priestley (1998) and Bilson et al (2001) for emerging markets. We are aware of one study which has used several pre-specified local and global factors, but for emerging markets only (Rendu de Lint, 2002).…”

Macroeconomic Indicators and Their Impact on Stock Market Performance in the Short and Long Run: The Case of the Baltic States / Makroekonominiai Rodikliai Ir Jų Įtaka Akcijų Rinkos Indeksui Trumpuoju Ir Ilguoju Laikotarpiu: Baltijos Šalių Atvejis

“…The connection of these two fields gives the shape to the problem of an assessment of the relation between macroeconomic indicators and stock market, which is researched in the works of economists all over the world. While analyzing the relation between the country's macroeconomic factors and stock market index the scientists yet mostly apply to well developed stock markets like the USA (Cheng 1995;Clare and Thomas 1994), Japan (Mukherjee and Naka 1995), Italy (Panetta 2002), Spain (Martinez and Rubio 1989) and others. More and more researches take place in developing financial markets, including the works written by Mookerjee and Yu (1997), Maysami and Koh (2000), who analyzed the dependence of changes of stock market indices quoted in Singapore stock market from macroeconomic factors, also Kwon and Shin (1999), who analyzed such connection in the stock market of South Korea, and Chong and Goh (2004), who analyzed the stock market in Malaysia.…”

Stock Price Distributions and News: Evidence from Index Options

“…See also King (1966). Applications of the Chen, Roll and Ross two-step procedure to the U.K. stock market include Beenstock and Chan (1988), Poon and Taylor (1991), Clare and Thomas (1994) and Cheng (1995). In addition, Priestley (1996), applies the one-step method of Burmeister and McElroy (1988).…”