REVIEW JOURNAL
TITLE
: Macroeconomic variables and stock market: US review
WRITER
: Martin Sirucek
A. The
background and research purposes
Investing in shares is one of the
options how to appreciate disposable financial resources. Unlike other
financial assets, investors link this instrument with certain features – stocks
and shares are claimed to be a risky investment instrument as they can be
subject to dramatic price swings over a short period of time.
The
effect of psychological factors is characteristic for the short-term and
medium-term investment horizon, while a long-term investor should pay attention
mostly to fundamental factors and realise the fundaments on which he or she was
entering the position It is the fundaments and their impact on the price of a
particular title that are the most well-known factors over the long run.
The primary factor of share price growth
stated by Hysek (2009) is as the ability of companies to improve their
financial indicators (mostly free cash flow and/or net profit per share).
Shares and stock markets are very sensitive to any price-shaping information
relevant for the future direction of the market development.
B. Method
By using the OLS method, the paper will
work with the standard regressive multidimensional model derived from the study
of Kandir (2008) and other coherent mathematic-statistical methods.
Weber
(1995).
This
correlation will be tracked by the Pearson correlation coefficient.. Related
standard tests will be used within the analysis and compilation of the regressive
model as well. They will include firstly the Durbin-Watson statistical test of
seemingly unrelated regression that will subsequently be benchmarked against
the determination index value.
C. The
results of research and discussions
As said above, the fundamental method
for analysing stocks and shares is the correlation analysis.
The values reached for correlation
coefficients confirm the positive correlation between interest rates, oil
prices, producer price index and industrial production index. They also confirm
negative correlation for unemployment, which corresponds to the economic theory
D. Conclusion
As
the current price of stocks and shares expresses discounted future expected
evenues from their sale, Flannery and Protopapadakis (2002) consider macroeconomic
factors as the most significant indicators determining the income from shares,
because these factors have an impact on future cash flow of the society and on
discount rates. This means that it is macroeconomic factors that have a
dominant impact on the share prices.
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