Empirical Analyses of Determinants of D.J.S.I.US Mean Returns
This study investigates the relationship between 10
year bond value, Yen/U.S dollar exchange rate, non-farm payrolls (all
employs) and crude oil to U.S. Dow Jones Sustainability Index. A
GARCH model is used to test these relationships for the period
January 1st 1999 to January 31st 2008 using monthly data. Results
show that an increase of the 10 year bond and non farm payrolls (all
employs) lead to an increase of the D.J.S.I returns. On the contrary
the volatility of the Yen/U.S dollar exchange rates as well as the
increase of crude oil returns has negative effects on the U.S D.J.S.I
returns. This study aims at assisting investors to understand the
influences certain macroeconomic indicators have on the companies-
stock returns as reported by the D.J.S.I.
[1] A. A. El-Masry, "The exchange rate exposure of UK nonfinancial
companies: industry level analysis," Managerial Finance, vol. 32, pp.
115-36, 2006.
[2] A. Azapagic, "Systems approach to corporate sustainability: A general
management framework," Process Safety & Environmental Protection,
vol. 81, pp. 303-16, 2003.
[3] A. Carroll, "The Pyramid of Corporate Social Responsibility: Toward
the Moral Management of Organizational Stakeholders," Business
Horizons, Vol. 34, pp. 39-48, 1991.
[4] A. Humpe, and P. Macmillan, "Can Macroeconomic Variables Explain
Long Term Stock Market Movements? A Comparison of the US and
Japan," CDMA Working Paper No. 07/20, 2007. Available at SSRN:
http://ssrn.com/abstract=1026219
[5] A. Nasseh, and J. Strauss, "Stock prices and domestic and international
macroeconomic activity: a cointegration approach," The Quarterly
Review of Economics and Finance, vol. 40, pp. 229-45, 2000.
[6] A. Samitas, and D. Kenourgios, "Macroeconomic Factors' Influence on
'New' European Countries' Stock Returns: The Case of Four Transition
Economies," International Journal of Financial Services Management,
vol. 2, pp. 34-49, 2007.
[7] C. C. Bautista, "Interest rate - exchange rate dynamics in the
Philippines: a DCC analysis," Applied Economics Letters, vol. 10, pp.
107-11, 2003.
[8] C. Ciner, "Energy Shocks and Financial Markets: Nonlinear Linkages,"
Studies in Nonlinear Dynamics & Econometrics, vol. 5, pp. 203-12,
2001.
[9] C. Jones, and G. Kaul "Oil and the Stock Markets", Journal of Finance,
vol. 51, pp. 463-91, 1996.
[10] C. Pilar, and S. Rafael, "Does derivatives trading destabilize the
underlying assets? Evidence from the Spanish stock market," Applied
Economics Letters, vol. 9, pp. 107-10, 2002.
[11] D. A Crowther, Social Critique of Corporate Reporting, Aldershot:
Ashgate, UK, 2002.
[12] D. G. Dickinson, "Stock market integration and macroeconomic
fundamentals: an empirical analysis," Applied Financial Economics,
vol. 10, pp. 261-76, 2000.
[13] Dow Jones Sustainability Index (D.J.S.I). Available at:
www.sustainability-index.com
[14] Dow Jones Sustainability North America Index - Dow Jones
Sustainability United States Index, Guide Book, Version 3.1, January
2008. Available at: http://www.sustainabilityindex.
com/djsi_pdf/publications/Guidebooks/
DJSI_NA_Guidebook_31.pdf
[15] E. Bartov, and G. M. Bodnar, "Firm valuation, earnings expectations
and the exchange rate exposure effect," Journal of Finance, vol. 49, pp.
1755-85, 1994.
[16] E. Drimbetas, ╬Ø. Sariannidis, and N.Porfiris, "The effect of derivatives
trading on volatility of the underlying asset: evidence from the Greek
stock market," Applied Financial Economics, vol. 17, pp. 139-148,
2007.
[17] E. F. Fama, and G. W. Schwert, "Asset Returns and Inflation," Journal
of Financial Economics, vol. 5, pp. 115-46, 1977.
[18] E. Fama, "Stock returns, Expected Returns, and Real Activity," Journal
of Finance, vol. 45, pp. 1089-108, 1990.
[19] European Commission, Green Paper: Promoting a European
framework for Corporate Social Responsibility, Brussels, 2001.
[20] Federal Reserve Bank of San Francisco "Two Measures of
Employment: How Different Are They?", 2004. Available at:
http://www.frbsf.org/publications/economics/letter/2004/el2004-
23.html
[21] H. Gulen, and S. Mayhew, "Stock index futures trading and volatility in
international equity markets," The Journal of Futures Markets, vol. 20,
pp. 661-85, 2000.
[22] H. R. Bowen, Social Responsibilities of the Businessman, Harper and
Brothers, New York, 1953.
[23] I. A. Diallo, "Exchange rate volatility and investment: a panel data
cointegration approach", 2007. Available at: http://mpra.ub.unimuenchen.
de/5364/1/MPRA_paper_5364.pdf
[24] J. D. Hamilton, "Oil and the Macroeconomy," forthcoming in: S.
Durlauf and L. Blume (eds.), The New Palgrave Dictionary of
Economics, 2nd ed., London: Macmillan, 2005. Available at:
http://dss.ucsd.edu/~jhamilto/JDH_palgrave_oil.pdf
[25] J. D. Hamilton, "What is an oil shock? ," Journal of Econometrics, Vol.
113, pp. 363-98, 2003.
[26] J. F. J. Vos, "Corporate social responsibility and the identification of
stakeholders," Corporate Social Responsibility and Environmental
Management, vol. 10, pp. 141-52, 2003.
[27] J. L. Kling, "Oil Price Shocks and Stock-Market Behavior," Journal of
Portfolio Management, vol. 12, pp. 34-9, 1985.
[28] J. M. Griffin, and R. M. Stulz, "International competition and exchange
rate shocks: a cross country industry analysis of stock returns," Review
of Financial Studies, vol. 14, pp. 215-41, 2001.
[29] J. Rotemberg, and M. Woodford, "Imperfect Competition and the
Effects of Energy Price Increases on Economic Activity," Journal of
Money, Credit and Banking, vol. 28, pp. 549-77, 1996.
[30] J. Shanken, and M. I. Weinstein, "Economic forces and the stock
market revisited," Journal of Empirical Finance, vol. 13, pp. 129-44,
2006.
[31] K. Léon, "The Effects of Interest Rates Volatility on Stock Returns and
Volatility: Evidence from Korea," International Research Journal of
Finance and Economics, vol. 14, pp. 285-90, 2008.
[32] M. M. Boyer, and D. Filion, "Common and Fundamental Factors in
Stock Returns of Canadian Oil and Gas Companies," Energy
Economics, Vol. 29, pp. 428-53, 2007.
[33] M-S. Pan, and P. L. Hsueh, "Transmission of stock returns and
volatility between U.S. and Japan: evidence from stock index future
markets," Asia-Pacific Financial Markets, vol. 5, pp. 211-25, 1998.
[34] Dow Jones Sustainability Index US Components, (2008), available at:
http://www.sustainabilityindex.
com/djsi_protected/djsi_na/SAM_DJSIUS_Components.pdf
[35] N. Chen, R. Roll, and S. Ross, (1986), "Economic forces and the stock
market-, Journal of Business, Vol. 59, pp. 383-403.
[36] N. F. Chen, "Financial investment opportunities and the
macroeconomy," Journal of Finance, vol. 46, pp. 529-54, 1991.
[37] N. Günsel, and S. Çukur "The Effects of Macroeconomic Factors on
the London Stock Returns: A Sectoral Approach", International
Research Journal of Finance and Economics, Vol. 10, pp. 140-52,
2007.
[38] N. Joseph, "Modelling the impacts of interest rate and exchange rate
changes on UK stock returns," Derivatives Use, Trading and
Regulation, vol. 7, pp. 306-23, 2002.
[39] OECD, Corporate Responsibility: Private Initiatives and Public Goods,
May, Paris, 2001.
[40] P. Bologna, and L. Cavallo, "Does the introduction of stock index
futures effectively reduce stock market volatility? Is the ÔÇÿfuture effect-
immediate? Evidence from the Italian stock exchange using GARCH,"
Applied Financial Economics, vol. 12, pp. 183-92, 2002.
[41] P. Jorion, "The exchange-rate exposure of US multinational," Journal
of Business, vol. 63, pp. 331-45, 1990.
[42] P. Kotler, and N. Lee, Corporate Social Responsibility. Doing the Most
Good for Your Company and Your Cause, John Wiley & Sons, Inc.,
Hoboken, NJ, 2005.
[43] P. Sadorsky, "Oil price shocks and stock market activity," Energy
Economics, vol. 21, pp.449-69, 1999.
[44] R. Connolly, C. Stivers, and L. Sun, "Stock market uncertainty and the
stock-bond return relation," Journal of Financial and Quantitative
Analysis, vol. 40, pp. 161-94, 2005.
[45] R. Dornbusch, and S. Fischer, "Exchange Rates and Current Account,"
American Economic Review, vol. 70, pp. 960-71, 1980.
[46] R. F. Engle, "Autoregressive conditional Heteroscedasticity with
estimates of the variance of United Kingdom inflation," Econometrica,
vol. 50, pp. 987-1007, 1982.
[47] R. F. Engle, and V. K. Ng, "Measuring and testing the impact of news
on volatility," Journal of Finance, Vol. 48, pp. 1749-78, 1993.
[48] R. R. Sims, Ethics and Corporate Social Responsibility - Why Giants
Fall, Praeger, Westport USA, 2003.
[49] S. Ahmed, "Aggregate Economic Variables and Stock Markets in
India," International Research Journal of Finance and Economics, vol.
14, pp. 141-64, 2008.
[50] S. d-Addona, and A. H. Kind, "International stock-bond correlations in
a simple affine asset pricing model," Journal of Banking & Finance,
vol. 30, pp. 2747-65, 2006.
[51] S. Leduc, and K. Sill, "A quantitative analysis of oil-price shocks,
systematic monetary policy, and economic downturns," Journal of
Monetary Economics, vol. 51, pp. 781-808, 2004.
[52] S. M. Bartram, "Linear and nonlinear foreign exchange rate exposures
of German non financial corporations," Journal of International Money
and Finance, vol. 23, pp. 673-99, 2004.
[53] S. Maslov, and B. M. Roehner, "The conundrum of stock versus bond
prices," Physica A: Statistical Mechanics and its Applications, vol. 335,
pp. 164-82, 2004.
[54] S. P. A. Brown, and M. K. Yucel, "Energy prices and aggregate
economic activity: an interpretative survey", Quarterly Review of
Economics and Finance, vol. 42, pp. 193-208, 2002.
[55] T. Bollerslev, "Generalized autoregressive conditional
heteroskedasticity," Journal of Econometrics, vol. 31, pp. 307-27,
1986.
[56] T. Harchaoui, F. Tarkhani, and T. Yuen, "The effects of the exchange
rate on investment: Evidence from Canadian manufacturing industries,"
Working Paper, Bank of Canada, 2005. Available at:
www.bankofcanada.ca/en/res/wp/2005/wp05-22.pdf
[57] T. J. Brailsford, and R. W. Faff, "Modelling Australian stock market
volatility," Australian Journal of Management, vol. 18, pp. 109-32,
1993.
[58] W. Schiebel, and S. Pöchtrager, "Corporate ethics as a factor for
success - the measurement instrument of the University of Agricultural
Sciences (BOKU), Vienna," Supply Chain Management: An
international Journal, vol. 8, pp.116-21, 2003.
[59] Y. Hamao, "An Empirical Examination of the Arbitrage Pricing
Theory: Using Japanese Data," Japan and the World Economy, Vol. 1,
pp. 45-61, 1989.
[1] A. A. El-Masry, "The exchange rate exposure of UK nonfinancial
companies: industry level analysis," Managerial Finance, vol. 32, pp.
115-36, 2006.
[2] A. Azapagic, "Systems approach to corporate sustainability: A general
management framework," Process Safety & Environmental Protection,
vol. 81, pp. 303-16, 2003.
[3] A. Carroll, "The Pyramid of Corporate Social Responsibility: Toward
the Moral Management of Organizational Stakeholders," Business
Horizons, Vol. 34, pp. 39-48, 1991.
[4] A. Humpe, and P. Macmillan, "Can Macroeconomic Variables Explain
Long Term Stock Market Movements? A Comparison of the US and
Japan," CDMA Working Paper No. 07/20, 2007. Available at SSRN:
http://ssrn.com/abstract=1026219
[5] A. Nasseh, and J. Strauss, "Stock prices and domestic and international
macroeconomic activity: a cointegration approach," The Quarterly
Review of Economics and Finance, vol. 40, pp. 229-45, 2000.
[6] A. Samitas, and D. Kenourgios, "Macroeconomic Factors' Influence on
'New' European Countries' Stock Returns: The Case of Four Transition
Economies," International Journal of Financial Services Management,
vol. 2, pp. 34-49, 2007.
[7] C. C. Bautista, "Interest rate - exchange rate dynamics in the
Philippines: a DCC analysis," Applied Economics Letters, vol. 10, pp.
107-11, 2003.
[8] C. Ciner, "Energy Shocks and Financial Markets: Nonlinear Linkages,"
Studies in Nonlinear Dynamics & Econometrics, vol. 5, pp. 203-12,
2001.
[9] C. Jones, and G. Kaul "Oil and the Stock Markets", Journal of Finance,
vol. 51, pp. 463-91, 1996.
[10] C. Pilar, and S. Rafael, "Does derivatives trading destabilize the
underlying assets? Evidence from the Spanish stock market," Applied
Economics Letters, vol. 9, pp. 107-10, 2002.
[11] D. A Crowther, Social Critique of Corporate Reporting, Aldershot:
Ashgate, UK, 2002.
[12] D. G. Dickinson, "Stock market integration and macroeconomic
fundamentals: an empirical analysis," Applied Financial Economics,
vol. 10, pp. 261-76, 2000.
[13] Dow Jones Sustainability Index (D.J.S.I). Available at:
www.sustainability-index.com
[14] Dow Jones Sustainability North America Index - Dow Jones
Sustainability United States Index, Guide Book, Version 3.1, January
2008. Available at: http://www.sustainabilityindex.
com/djsi_pdf/publications/Guidebooks/
DJSI_NA_Guidebook_31.pdf
[15] E. Bartov, and G. M. Bodnar, "Firm valuation, earnings expectations
and the exchange rate exposure effect," Journal of Finance, vol. 49, pp.
1755-85, 1994.
[16] E. Drimbetas, ╬Ø. Sariannidis, and N.Porfiris, "The effect of derivatives
trading on volatility of the underlying asset: evidence from the Greek
stock market," Applied Financial Economics, vol. 17, pp. 139-148,
2007.
[17] E. F. Fama, and G. W. Schwert, "Asset Returns and Inflation," Journal
of Financial Economics, vol. 5, pp. 115-46, 1977.
[18] E. Fama, "Stock returns, Expected Returns, and Real Activity," Journal
of Finance, vol. 45, pp. 1089-108, 1990.
[19] European Commission, Green Paper: Promoting a European
framework for Corporate Social Responsibility, Brussels, 2001.
[20] Federal Reserve Bank of San Francisco "Two Measures of
Employment: How Different Are They?", 2004. Available at:
http://www.frbsf.org/publications/economics/letter/2004/el2004-
23.html
[21] H. Gulen, and S. Mayhew, "Stock index futures trading and volatility in
international equity markets," The Journal of Futures Markets, vol. 20,
pp. 661-85, 2000.
[22] H. R. Bowen, Social Responsibilities of the Businessman, Harper and
Brothers, New York, 1953.
[23] I. A. Diallo, "Exchange rate volatility and investment: a panel data
cointegration approach", 2007. Available at: http://mpra.ub.unimuenchen.
de/5364/1/MPRA_paper_5364.pdf
[24] J. D. Hamilton, "Oil and the Macroeconomy," forthcoming in: S.
Durlauf and L. Blume (eds.), The New Palgrave Dictionary of
Economics, 2nd ed., London: Macmillan, 2005. Available at:
http://dss.ucsd.edu/~jhamilto/JDH_palgrave_oil.pdf
[25] J. D. Hamilton, "What is an oil shock? ," Journal of Econometrics, Vol.
113, pp. 363-98, 2003.
[26] J. F. J. Vos, "Corporate social responsibility and the identification of
stakeholders," Corporate Social Responsibility and Environmental
Management, vol. 10, pp. 141-52, 2003.
[27] J. L. Kling, "Oil Price Shocks and Stock-Market Behavior," Journal of
Portfolio Management, vol. 12, pp. 34-9, 1985.
[28] J. M. Griffin, and R. M. Stulz, "International competition and exchange
rate shocks: a cross country industry analysis of stock returns," Review
of Financial Studies, vol. 14, pp. 215-41, 2001.
[29] J. Rotemberg, and M. Woodford, "Imperfect Competition and the
Effects of Energy Price Increases on Economic Activity," Journal of
Money, Credit and Banking, vol. 28, pp. 549-77, 1996.
[30] J. Shanken, and M. I. Weinstein, "Economic forces and the stock
market revisited," Journal of Empirical Finance, vol. 13, pp. 129-44,
2006.
[31] K. Léon, "The Effects of Interest Rates Volatility on Stock Returns and
Volatility: Evidence from Korea," International Research Journal of
Finance and Economics, vol. 14, pp. 285-90, 2008.
[32] M. M. Boyer, and D. Filion, "Common and Fundamental Factors in
Stock Returns of Canadian Oil and Gas Companies," Energy
Economics, Vol. 29, pp. 428-53, 2007.
[33] M-S. Pan, and P. L. Hsueh, "Transmission of stock returns and
volatility between U.S. and Japan: evidence from stock index future
markets," Asia-Pacific Financial Markets, vol. 5, pp. 211-25, 1998.
[34] Dow Jones Sustainability Index US Components, (2008), available at:
http://www.sustainabilityindex.
com/djsi_protected/djsi_na/SAM_DJSIUS_Components.pdf
[35] N. Chen, R. Roll, and S. Ross, (1986), "Economic forces and the stock
market-, Journal of Business, Vol. 59, pp. 383-403.
[36] N. F. Chen, "Financial investment opportunities and the
macroeconomy," Journal of Finance, vol. 46, pp. 529-54, 1991.
[37] N. Günsel, and S. Çukur "The Effects of Macroeconomic Factors on
the London Stock Returns: A Sectoral Approach", International
Research Journal of Finance and Economics, Vol. 10, pp. 140-52,
2007.
[38] N. Joseph, "Modelling the impacts of interest rate and exchange rate
changes on UK stock returns," Derivatives Use, Trading and
Regulation, vol. 7, pp. 306-23, 2002.
[39] OECD, Corporate Responsibility: Private Initiatives and Public Goods,
May, Paris, 2001.
[40] P. Bologna, and L. Cavallo, "Does the introduction of stock index
futures effectively reduce stock market volatility? Is the ÔÇÿfuture effect-
immediate? Evidence from the Italian stock exchange using GARCH,"
Applied Financial Economics, vol. 12, pp. 183-92, 2002.
[41] P. Jorion, "The exchange-rate exposure of US multinational," Journal
of Business, vol. 63, pp. 331-45, 1990.
[42] P. Kotler, and N. Lee, Corporate Social Responsibility. Doing the Most
Good for Your Company and Your Cause, John Wiley & Sons, Inc.,
Hoboken, NJ, 2005.
[43] P. Sadorsky, "Oil price shocks and stock market activity," Energy
Economics, vol. 21, pp.449-69, 1999.
[44] R. Connolly, C. Stivers, and L. Sun, "Stock market uncertainty and the
stock-bond return relation," Journal of Financial and Quantitative
Analysis, vol. 40, pp. 161-94, 2005.
[45] R. Dornbusch, and S. Fischer, "Exchange Rates and Current Account,"
American Economic Review, vol. 70, pp. 960-71, 1980.
[46] R. F. Engle, "Autoregressive conditional Heteroscedasticity with
estimates of the variance of United Kingdom inflation," Econometrica,
vol. 50, pp. 987-1007, 1982.
[47] R. F. Engle, and V. K. Ng, "Measuring and testing the impact of news
on volatility," Journal of Finance, Vol. 48, pp. 1749-78, 1993.
[48] R. R. Sims, Ethics and Corporate Social Responsibility - Why Giants
Fall, Praeger, Westport USA, 2003.
[49] S. Ahmed, "Aggregate Economic Variables and Stock Markets in
India," International Research Journal of Finance and Economics, vol.
14, pp. 141-64, 2008.
[50] S. d-Addona, and A. H. Kind, "International stock-bond correlations in
a simple affine asset pricing model," Journal of Banking & Finance,
vol. 30, pp. 2747-65, 2006.
[51] S. Leduc, and K. Sill, "A quantitative analysis of oil-price shocks,
systematic monetary policy, and economic downturns," Journal of
Monetary Economics, vol. 51, pp. 781-808, 2004.
[52] S. M. Bartram, "Linear and nonlinear foreign exchange rate exposures
of German non financial corporations," Journal of International Money
and Finance, vol. 23, pp. 673-99, 2004.
[53] S. Maslov, and B. M. Roehner, "The conundrum of stock versus bond
prices," Physica A: Statistical Mechanics and its Applications, vol. 335,
pp. 164-82, 2004.
[54] S. P. A. Brown, and M. K. Yucel, "Energy prices and aggregate
economic activity: an interpretative survey", Quarterly Review of
Economics and Finance, vol. 42, pp. 193-208, 2002.
[55] T. Bollerslev, "Generalized autoregressive conditional
heteroskedasticity," Journal of Econometrics, vol. 31, pp. 307-27,
1986.
[56] T. Harchaoui, F. Tarkhani, and T. Yuen, "The effects of the exchange
rate on investment: Evidence from Canadian manufacturing industries,"
Working Paper, Bank of Canada, 2005. Available at:
www.bankofcanada.ca/en/res/wp/2005/wp05-22.pdf
[57] T. J. Brailsford, and R. W. Faff, "Modelling Australian stock market
volatility," Australian Journal of Management, vol. 18, pp. 109-32,
1993.
[58] W. Schiebel, and S. Pöchtrager, "Corporate ethics as a factor for
success - the measurement instrument of the University of Agricultural
Sciences (BOKU), Vienna," Supply Chain Management: An
international Journal, vol. 8, pp.116-21, 2003.
[59] Y. Hamao, "An Empirical Examination of the Arbitrage Pricing
Theory: Using Japanese Data," Japan and the World Economy, Vol. 1,
pp. 45-61, 1989.
@article{"International Journal of Business, Human and Social Sciences:53984", author = "Nikolaos Sariannidis and Grigoris Giannarakis and Nikolaos Litinas and Nikos Kartalis", title = "Empirical Analyses of Determinants of D.J.S.I.US Mean Returns", abstract = "This study investigates the relationship between 10
year bond value, Yen/U.S dollar exchange rate, non-farm payrolls (all
employs) and crude oil to U.S. Dow Jones Sustainability Index. A
GARCH model is used to test these relationships for the period
January 1st 1999 to January 31st 2008 using monthly data. Results
show that an increase of the 10 year bond and non farm payrolls (all
employs) lead to an increase of the D.J.S.I returns. On the contrary
the volatility of the Yen/U.S dollar exchange rates as well as the
increase of crude oil returns has negative effects on the U.S D.J.S.I
returns. This study aims at assisting investors to understand the
influences certain macroeconomic indicators have on the companies-
stock returns as reported by the D.J.S.I.", keywords = "Bond value, Corporate Social Responsibility, Crudeoil, D.J.S.I United States, Exchange rate, GARCH, Non-farmpayrolls.", volume = "3", number = "6", pages = "785-6", }
