Economic Forces and the Stock Market
Nai‐Fu Chen, Richard W. Roll, Stephen A. Ross
The Journal of Business · 1986 · 5,407 citations
Abstract
This paper tests whether innovations in macroeconomic variables are risks that are rewarded in the stock market. Financial theory suggests that the following macroeconomic variables should systematically affect stock market returns: the spread between long and short interest rates, expected and unexpected inflation, industrial production, and the spread between high- and low-grade bonds. We find that these sources of risk are significantly priced. Furthermore, neither the market portfolio nor aggregate consumption are priced separately. We also find that oil price risk is not separately rewarded in the stock market.
Cite this paper
Chen, N., Roll, R. W., & Ross, S. A. (1986). Economic forces and the stock market. The Journal of Business, 59(3), 383. https://doi.org/10.1086/296344
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