Finance

Relationship between stock returns of different sectors within the U.S. stock market and inflation rates

October 3, 2017
inflatie

Based on previous studies, responses of different sectors within U.S stock market to inflation rates have not been studied in detail. On the other hand, there are some contradictory studies, which was a motivation for Seyedhamidreza Hosseini, alumnus of MScBA at TIAS School for Business and Society, to study on this topic.

This study investigates the relationship between stock returns of different sectors within the U.S. stock market and inflation rates over a period of 21 years. Due to undeniable effects of real activity and interest rate on inflation, Hosseini has included these two macroeconomic variables into the regression models. The linear regression demonstrates that past rates of inflation influence the current stock returns, while the responses of stock returns to inflation rates vary from one sector to another. Moreover, real activity is discovered to have a positive effect on the expected stock returns of all sectors. Conversely, most of the sectors do not have a significant relationship with previous values of interest rates.

Read his study here.

This article appeared in Journal of Multidisciplinary Engineering Science and Technology (JMEST). Vol. 4 Issue 8, August - 2017

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