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Different stock categories are influenced differently by the economic indicators
Finance & Accounting
Pages 30 (7530 words)
Abstract Stock markets are a vital part of a country’s economy and of businesses in the economy, and economic policy decisions by the government impact stock markets greatly. It is therefore important to know how different stock categories are impacted by economic decisions of the governments and the central banks.
This difference is important to understand as it impacts not only businesses and investors but also governments in their policy formulation. This paper, therefore, aims to study whether different economic indicators influence large and small cap stocks by looking to answer the question: The key research question explored the relationship between economic indicators and stock prices small cap and as large cap companies in the US using available data for the last 10 years (from Jan 2001 to June 2011) based on 9 leading economic indicators and on two stock indices (one each for large and small cap stocks). The economic indicators were the independent variables while the stock price was the dependent variable in the multiple regression models developed for the two stock indices. Using public records, data were collected from publicly available financial statements of corporations. The proposed relationships were tested through regression analyses. Results indicated that the two stock categories are influenced by a different set of economic indicators except the Consumer Price Index, the Industrial Production Index (IPI), and the Consumer Confidence Index. ...
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