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The Stability of the Relation Between the Stock Market and Macroeconomic Forces
Author(s) -
Panetta Fabio
Publication year - 2002
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/1468-0300.00093
Subject(s) - equity (law) , uncorrelated , economics , stock (firearms) , econometrics , stock market , financial economics , stability (learning theory) , shares outstanding , monetary economics , mathematics , statistics , finance , computer science , mechanical engineering , paleontology , horse , machine learning , political science , law , biology , engineering , corporate governance , shareholder
This paper identifies the macroeconomic factors that influence Italian equity returns and tests the stability of their relation with securities returns. The relation between stock returns and the macroeconomic factors is found to be unstable: not only are the factor loadings of individual securities virtually uncorrelated over time, but a high percentage of the shares experience a reversal of the sign of the estimated loadings. This result is not confined to single periods or to a small group of shares, but holds in different sub–periods and for securities in all risk classes. These findings suggest that research should carefully investigate the specification of the return generating process and the stability of the risk measures. (J.E.L.: G12, E44).