Predicting long-run risk factors of stock returns: Evidence from Australia
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Date
2023
Authors
Banerjee, R.
Cavoli, T.
McIver, R.
Meng, S.
Wilson, J.K.
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Journal article
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Australian Economic Papers, 2023; 62(3):377-395
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<jats:title>Abstract</jats:title><jats:p>This study utilises the stock market data provided by the Australian Equity Database to analyse the long‐run relationship between Australian stock returns and key macroeconomic variables over the period 1926–2017. To measure the diverse risk factors in the stock market, we examine the possible determinants in four main categories: real, financial, domestic and international. Our results reveal that historical stock returns are strongly connected to financial and international factors as compared to real and domestic factors. Both the 1973–1974 OPEC Oil Price Crisis and 2007–2008 Global Financial Crisis had dampening effects on stock returns. There is a positive association between the US and Australian stock markets in the long‐run. These findings on stock market dynamics and their linkages with domestic and international macroeconomic policy changes in the long‐run have important implications for traders and practitioners.</jats:p>
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Copyright 2023 The Authors. Australian Economic Papers published by John Wiley & Sons Australia, Ltd.This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. (https://creativecommons.org/licenses/by/4.0/)