The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA

The effect of risk factors on equity markets plays a crucial role in formulating risk management strategies by market participants. Numerous studies in this area of research suggest different sets of factors that are thought to affect asset returns. Capital Asset Pricing Model (CAPM) theorists consi...

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Main Author:	Ali Rashed Alyammahi, Maryam
Format:	Thesis
Language:	English English
Published:	2021
Subjects:	H Social Sciences (General) HB Economic Theory
Online Access:	http://eprints.utem.edu.my/id/eprint/26078/1/The%20impacts%20of%20macroeconomic%20risk%20factors%20on%20industrial%20stock%20returns%20in%20UAE%20and%20USA.pdf http://eprints.utem.edu.my/id/eprint/26078/2/The%20impacts%20of%20macroeconomic%20risk%20factors%20on%20industrial%20stock%20returns%20in%20UAE%20and%20USA.pdf
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spelling	my-utem-ep.260782023-01-13T16:03:40Z The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA 2021 Ali Rashed Alyammahi, Maryam H Social Sciences (General) HB Economic Theory The effect of risk factors on equity markets plays a crucial role in formulating risk management strategies by market participants. Numerous studies in this area of research suggest different sets of factors that are thought to affect asset returns. Capital Asset Pricing Model (CAPM) theorists consider the market index to be the only relevant factor in measuring an asset’s systematic risk. However, many empirical studies based on CAPM fail to provide evidence for the relationship between the stock return and market beta across country. Hence, researchers looked for other risk factors. The arbitrage pricing theory (APT) as an alternative to the CAPM hypothesizes that asset returns are dependent on several types of risk factors. However, APT also fails to identify the relevant factor structure that can explain the variations in stock returns. Therefore, researchers looked for other risk factors. The purpose of this study is to examine the effect of local and global macroeconomic risk factors on the industries stock returns across national equity of two countries namely UAE and USA. The study employed a multifactor pricing model and single factor model is used to test the effect of global risk factors represented by the world market index on industries stock returns across seven industries in both countries. The industries derived from Securities and Committees Authority (SCA) in the UAE and Global Finance Data (GFD) data base were chosen. The data for the industry indices covers the period of May 2003 to May 2018. The findings showed that the effect of macroeconomic factor such as exchange rate, export, import, industrial production, inflation, money supply M1, money supply M2, and oil prices are varied across industries in both countries. The results also showed that global risk factor has stronger effect on industries’ return in both countries. Multifactor model show that local risk factors have a strong explanatory power in explaining the variations of the monthly industries excess return in these two countries. Significant relationships have been found between macroeconomic risk factors and industry stock returns in the two national markets, some factors have a uniform effect across industries, while others do not. However, the local market excess return is considered as the most important explanatory factor among local risk factors and the single factor model show that global risk factors as represented by the world market portfolio poorly explained the variations of the monthly excess returns. Finally, a practical perspective can be beneficial to the cross- country investors and practitioners in having better understanding of how and to what extent risk factors affect investment returns of different industries across countries. Such understanding should enable investors and practitioners to be more informed with respect to allocating, timing, and diversifying their international investment portfolios. 2021 Thesis http://eprints.utem.edu.my/id/eprint/26078/ http://eprints.utem.edu.my/id/eprint/26078/1/The%20impacts%20of%20macroeconomic%20risk%20factors%20on%20industrial%20stock%20returns%20in%20UAE%20and%20USA.pdf text en public http://eprints.utem.edu.my/id/eprint/26078/2/The%20impacts%20of%20macroeconomic%20risk%20factors%20on%20industrial%20stock%20returns%20in%20UAE%20and%20USA.pdf text en validuser https://plh.utem.edu.my/cgi-bin/koha/opac-detail.pl?biblionumber=121243 phd doctoral Universiti Teknikal Malaysia Melaka Institute of Technology Management and Entrepreneurship Yahaya, Siti Norbaya
institution	Universiti Teknikal Malaysia Melaka
collection	UTeM Repository
language	English English
advisor	Yahaya, Siti Norbaya
topic	H Social Sciences (General) HB Economic Theory
spellingShingle	H Social Sciences (General) HB Economic Theory Ali Rashed Alyammahi, Maryam The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA
description	The effect of risk factors on equity markets plays a crucial role in formulating risk management strategies by market participants. Numerous studies in this area of research suggest different sets of factors that are thought to affect asset returns. Capital Asset Pricing Model (CAPM) theorists consider the market index to be the only relevant factor in measuring an asset’s systematic risk. However, many empirical studies based on CAPM fail to provide evidence for the relationship between the stock return and market beta across country. Hence, researchers looked for other risk factors. The arbitrage pricing theory (APT) as an alternative to the CAPM hypothesizes that asset returns are dependent on several types of risk factors. However, APT also fails to identify the relevant factor structure that can explain the variations in stock returns. Therefore, researchers looked for other risk factors. The purpose of this study is to examine the effect of local and global macroeconomic risk factors on the industries stock returns across national equity of two countries namely UAE and USA. The study employed a multifactor pricing model and single factor model is used to test the effect of global risk factors represented by the world market index on industries stock returns across seven industries in both countries. The industries derived from Securities and Committees Authority (SCA) in the UAE and Global Finance Data (GFD) data base were chosen. The data for the industry indices covers the period of May 2003 to May 2018. The findings showed that the effect of macroeconomic factor such as exchange rate, export, import, industrial production, inflation, money supply M1, money supply M2, and oil prices are varied across industries in both countries. The results also showed that global risk factor has stronger effect on industries’ return in both countries. Multifactor model show that local risk factors have a strong explanatory power in explaining the variations of the monthly industries excess return in these two countries. Significant relationships have been found between macroeconomic risk factors and industry stock returns in the two national markets, some factors have a uniform effect across industries, while others do not. However, the local market excess return is considered as the most important explanatory factor among local risk factors and the single factor model show that global risk factors as represented by the world market portfolio poorly explained the variations of the monthly excess returns. Finally, a practical perspective can be beneficial to the cross- country investors and practitioners in having better understanding of how and to what extent risk factors affect investment returns of different industries across countries. Such understanding should enable investors and practitioners to be more informed with respect to allocating, timing, and diversifying their international investment portfolios.
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Ali Rashed Alyammahi, Maryam
author_facet	Ali Rashed Alyammahi, Maryam
author_sort	Ali Rashed Alyammahi, Maryam
title	The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA
title_short	The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA
title_full	The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA
title_fullStr	The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA
title_full_unstemmed	The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA
title_sort	impacts of macroeconomic risk factors on industrial stock returns in uae and usa
granting_institution	Universiti Teknikal Malaysia Melaka
granting_department	Institute of Technology Management and Entrepreneurship
publishDate	2021
url	http://eprints.utem.edu.my/id/eprint/26078/1/The%20impacts%20of%20macroeconomic%20risk%20factors%20on%20industrial%20stock%20returns%20in%20UAE%20and%20USA.pdf http://eprints.utem.edu.my/id/eprint/26078/2/The%20impacts%20of%20macroeconomic%20risk%20factors%20on%20industrial%20stock%20returns%20in%20UAE%20and%20USA.pdf
_version_	1776103133434347520

The impacts of macroeconomic risk factors on industrial stock returns in UAE and USA

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