How Does the UK Stock Market React to Changes in Macroeconomic Variables?
Olsen, Sissel 2014. How Does the UK Stock Market React to Changes in Macroeconomic Variables? Masters Thesis University of East London Royal Docks Business School
2014 dissertation for MSc in Finance and Risk. Selected by academic staff as a good example of a masters level dissertation. The purpose behind this study is to find out whether there is a long term equilibrium relationship between the UK stock market and the macroeconomic variables. The stock market is represented by the Financial Times Stock Exchange (FTSE) 100 Share Index, and the macroeconomic variables included in the test, are CPI and unemployment. The data set includes data from January 1995 to June 2014 of the UK Consumer Price Index, UK unemployment rate, and the FTSE 100 index. To test for stationarity I used an augmented Dickey-Fuller (ADF) test, while a Johansen cointegration test is used to determine the long term equilibrium relationship. The result of the test is that both CPI and unemployment has a negative impact on the FTSE 100 index, however, the effect on stock prices from the unemployment rate is significantly higher than that of consumer prices. The result from the cointegration test indicates that the UK market is efficient, as the prices reacts to new information (changes in the macroeconomic variables).
|09 Sep 2014|
|Publication process dates|
|Deposited||01 Jun 2015|
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