IDEAS home Printed from https://ideas.repec.org/a/bit/bsrysr/v1y1010i1-2p39-46.html
   My bibliography  Save this article

Do macroeconomic factors matter for stock returns? Evidence from estimating a multifactor model on the Croatian market

Author

Listed:
  • Benaković Dubravka

    (Ministry of Finance of the Republic of Croatia, Katančićeva 5, 10000 Zagreb, Croatia)

  • Posedel Petra

    (Faculty of Economics & Business, University of Zagreb, Trg J. F. Kennedyja 6, 10000 Zagreb, Croatia)

Abstract

Factor models observe the sensitivity of an asset return as a function of one or more factors. This paper analyzes returns on fourteen stocks of the Croatian capital market in the period from January 2004 to October 2009 using inflation, industrial production, interest rates, market index and oil prices as factors. Both the direction and strength of the relation between the change in factors and returns are investigated. The analyses included fourteen stocks and their sensitivities to factors were estimated. The results show that the market index has the largest statistical significance for all stocks and a positive relation to returns. Interest rates, oil prices and industrial production also marked a positive relation to returns, while inflation had a negative influence. Furthermore, cross-sectional regression with the estimated sensitivities used as independent variables and returns in each month as dependent variables is performed. This analysis resulted in time series of risk premiums for each factor. The most important factor affecting stock prices proved to be the market index, which had a positive risk premium. A statistically significant factor in 2004 and 2008 was also inflation, marking a negative risk premium in 2004 and a positive one in 2008. The remaining three factors have not shown as significant.

Suggested Citation

  • Benaković Dubravka & Posedel Petra, 2010. "Do macroeconomic factors matter for stock returns? Evidence from estimating a multifactor model on the Croatian market," Business Systems Research, Sciendo, vol. 1(1-2), pages 39-46, January.
  • Handle: RePEc:bit:bsrysr:v:1:y:1010:i:1-2:p:39-46
    DOI: 10.2478/v10305-012-0023-z
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/v10305-012-0023-z
    Download Restriction: no

    File URL: https://libkey.io/10.2478/v10305-012-0023-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Benaković Dubravka & Posedel Petra, 2010. "Do macroeconomic factors matter for stock returns? Evidence from estimating a multifactor model on the Croatian market," Business Systems Research, Sciendo, vol. 1(1-2), pages 39-46, January.
    2. Peter Hördahl & Oreste Tristani, 2012. "Inflation Risk Premia In The Term Structure Of Interest Rates," Journal of the European Economic Association, European Economic Association, vol. 10(3), pages 634-657, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Širůček, Martin, 2015. "Kauzalní vztah peněžní nabídky a amerického akciového trhu [Money supply and US stock market causality]," MPRA Paper 66357, University Library of Munich, Germany, revised 30 Aug 2015.
    2. Muinde Patrick Mumo, 2017. "Effects of Macroeconomic Volatility on Stock Prices in Kenya: A Cointegration Evidence from the Nairobi Securities Exchange (NSE)," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(2), pages 1-14, February.
    3. Benaković Dubravka & Posedel Petra, 2010. "Do macroeconomic factors matter for stock returns? Evidence from estimating a multifactor model on the Croatian market," Business Systems Research, Sciendo, vol. 1(1-2), pages 39-46, January.
    4. Kvainickas Tomas Sovijus & Stankevičienė Jelena, 2019. "Regional Limitations of Stock Indices Prediction Models Based on Macroeconomic Variables," Economics and Culture, Sciendo, vol. 16(2), pages 5-20, December.
    5. Bucevska Vesna, 2013. "An Empirical Evaluation of GARCH Models in Value-at-Risk Estimation: Evidence from the Macedonian Stock Exchange," Business Systems Research, Sciendo, vol. 4(1), pages 49-64, March.
    6. Naveen R.S. & N. Sivakumar, 2016. "Impact of Macro-Economic Factors on Sectoral Indices – Evidence from Indian Markets," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 5(3), pages 174-182, August.
    7. Dolinar Denis & Zoričić Davor & Golubić Zrinka Lovretin, 2019. "Application of semi-deviation as a proxy for the expected return estimation in the Croatian equity market," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 5(1), pages 9-20, May.
    8. Katarzyna Kubiszewska & Marcin Potrykus, 2020. "Balkan Stock Exchanges – Consideration of the Length of the Estimation Window in Similar Markets," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 1047-1067.
    9. Maitra, Debasish & Rehman, Mobeen Ur & Dash, Saumya Ranjan & Kang, Sang Hoon, 2021. "Oil price volatility and the logistics industry: Dynamic connectedness with portfolio implications," Energy Economics, Elsevier, vol. 102(C).
    10. Sirucek, Martin, 2013. "Vliv peněžní nabídky na akciové bubliny v Japonsku [The impact of money supply on japanesee stock bubbles]," MPRA Paper 62817, University Library of Munich, Germany, revised 2013.
    11. Tomasz Schabek & Bojana Olgiæ Draženoviæ & Davor Mance, 2019. "Reaction of Zagreb Stock Exchange CROBEX Index to macroeconomic announcements within a high frequency time interval," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 741-758.
    12. Endang Mahpudin, 2020. "The Effect of Macroeconomics on Stock Price Index in the Republic of China," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 228-236.
    13. Mihovil An?elinovi? & Livija Valenti? & Ana Pavkovi?, 2020. "Equity Fund Performance and Sector Diversification," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 9(1), pages 25-43, June.
    14. Martin Širůček, 2013. "Impact of money supply on stock bubbles," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 61(7), pages 2835-2842.
    15. Zaimovic Azra & Arnaut-Berilo Almira & Mustafic Arnela, 2017. "Portfolio Diversification in the South-East European Equity Markets," South East European Journal of Economics and Business, Sciendo, vol. 12(1), pages 126-135, April.
    16. Muinde Patrick Mumo, 2017. "The Determinants of Stock Returns in the Emerging Market of Kenya: An Empirical Evidence," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(9), pages 8-21, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Širůček, 2013. "Impact of money supply on stock bubbles," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 61(7), pages 2835-2842.
    2. Daniela Kubudi & José Valentim Vicente, 2016. "A Joint Model of Nominal and Real Yield Curves," Working Papers Series 452, Central Bank of Brazil, Research Department.
    3. Martin Kliem & Alexander Meyer‐Gohde, 2022. "(Un)expected monetary policy shocks and term premia," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(3), pages 477-499, April.
    4. Tamer Aksoy & Yunus Emre Asan, 2020. "Assessing financial risk management in local governments: Case of Istanbul Metropolitan Municipality (IMM)," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 2(4), pages 10-23, October.
    5. Martin Ellison & Andreas Tischbirek, 2021. "Beauty Contests and the Term Structure [Risk Premia and Term Premia in General Equilibrium]," Journal of the European Economic Association, European Economic Association, vol. 19(4), pages 2234-2282.
    6. Güler, Mustafa Haluk & Keleş, Gürsu & Polat, Tandoğan, 2017. "An empirical decomposition of the liquidity premium in breakeven inflation rates," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 185-192.
    7. Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2010. "Inflation Expectations and Risk Premiums in an Arbitrage-Free Model of Nominal and Real Bond Yields," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 143-178, September.
    8. Beauregard, Remy & Christensen, Jens H.E. & Fischer, Eric & Zhu, Simon, 2024. "Inflation expectations and risk premia in emerging bond markets: Evidence from Mexico," Journal of International Economics, Elsevier, vol. 151(C).
    9. Hisashi Nakamura & Keita Nakayama & Akihiko Takahashi, 2008. "Term Structure of Interest Rates Under Recursive Preferences in Continuous Time," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 15(3), pages 273-305, December.
    10. Ireland, Peter N., 2015. "Monetary policy, bond risk premia, and the economy," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 124-140.
    11. Elizondo Rocío, 2023. "The Three Intelligible Factors of the Yield Curve in Mexico," Working Papers 2023-13, Banco de México.
    12. Lemke, Wolfgang, 2008. "An affine macro-finance term structure model for the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 19(1), pages 41-69, March.
    13. Ravenna, Federico & Seppälä, Juha, 2007. "Monetary policy, expected inflation and inflation risk premia," Bank of Finland Research Discussion Papers 18/2007, Bank of Finland.
    14. Andrea Berardi, 2013. "Inflation Risk Premia, Yield Volatility and Macro Factors," Working Papers 27/2013, University of Verona, Department of Economics.
    15. Dick, Christian D. & Schmeling, Maik & Schrimpf, Andreas, 2013. "Macro-expectations, aggregate uncertainty, and expected term premia," European Economic Review, Elsevier, vol. 58(C), pages 58-80.
    16. Yüksel, Ebru & Metin-Ozcan, Kivilcim & Hatipoglu, Ozan, 2013. "A survey on time-varying parameter Taylor rule: A model modified with interest rate pass-through," Economic Systems, Elsevier, vol. 37(1), pages 122-134.
    17. Vicente, José Valentim Machado & Guillen, Osmani Teixeira de Carvalho, 2013. "Do inflation-linked bonds contain information about future inflation?," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 67(2), June.
    18. Jose E. Gomez-Gonzalez & Jorge M. Uribe & Oscar M. Valencia, 2023. "Sovereign Risk and Economic Complexity: Machine Learning Insights on Causality and Prediction," IREA Working Papers 202315, University of Barcelona, Research Institute of Applied Economics, revised Nov 2023.
    19. Ivan Jaccard, 2024. "Monetary Asymmetries Without (And With) Price Stickiness," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 1003-1047, May.

    More about this item

    Keywords

    Factor models; risk premium; stock returns; estimated sensitivities; regression analysis; Factor models; risk premium; stock returns; estimated sensitivities; regression analysis;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bit:bsrysr:v:1:y:1010:i:1-2:p:39-46. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.