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The idiosyncratic component of stock returns and its relationship with macroeconomic variables in the U.S. market

Ben Brahim, Lahoucine ; Cisse, Samy
(2017)

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Benbrahim_Cisse_43701500_80751500_2017.pdf
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Details

Supervisors
Iania, Leonardo
Faculty
Louvain School of Management
Degree label
Master [120] en sciences de gestion
Abstract
The key objective of the present study is to investigate the idiosyncratic component of stock returns and its relationship to macroeconomic variables in the U.S. market throughout the examined period from 1990-2017. On the one hand, along the same lines as previous authors, we found that idiosyncratic volatility increased until the 1990s and strongly increased in 2000, primarily due to the emergence of the Internet bubble. Furthermore, we also noticed a surge during the subprime crisis period in 2008. On the other hand, we investigated the relationships between idiosyncratic volatility and the industrial production index, unemployment rates and money supply. We found them to be significant, and we explain them during the second part of this thesis.