Abstract
This paper aims to explore which macroeconomic factors affect the volatility of the automakers stock prices by employing a multifactor model. The study uses quarterly panel data of 39 automakers quoted on the stock exchanges in the 11 countries. It studies the effects of 19 macroeconomic variables from January 2000 to December 2017, and proposes the mixed-effect model constructed based on employing genetic algorithm and AIC criterion, and compares its explanatory power with the existing multifactor model (El Khoury, 2015). This paper suggests that the proposed model can shed more light on explaining the variability of stock prices of the quoted automakers. The findings show there are positive linkages between automaker's stock return volatility and explanatory variables such as stock market development, GDP and unemployment. Conversely, an inverse linkage between the dependent variable and money supply and IPI was found. The study demonstrates that selected macroeconomic factors can also be used as predictors.
Highlights
The car industry is an important sector of the global economy
The aim of this study is (i) to find out whether, and if so, what macroeconomic factors affect the volatility of stock prices of automakers, (ii) to propose a multifactor model that explains the volatility of stock prices of automakers by incorporating explanatory macroeconomic factors statistically significant, and iii) to test if the proposed model has higher explanatory power than the multifactor model proposed in this sector by El Khoury (2015)
The main aim of this paper is to test whether, and if so, what macroeconomic factors affect the volatility of stock prices of automakers; to propose a multifactor model that explains the volatility of stock prices of automakers by incorporating explanatory macroeconomic factors statistically significant; and to test its explanatory power
Summary
The car industry is an important sector of the global economy. This sector contributes by almost 3 percent of the global GDP with sales reaching a record of 88 million cars in 2016. The profit margins of suppliers and automakers are at 10-year-high levels, with capital spending (R&D) reaching the level of 95 billion USD in 2016.1 The car industry is a very progressive sector. The key innovations are driven by Industry 4.0 principles
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