The Macroeconomic Determinants of Small-Cap Stock Performance,
Details
- Author: Brian Franch Sabaidini
- Title: The macroeconomic determinants of small-cap stock performance in the USA
- Supervisor: Dr. P. Khrennikova / Prof. Dr. Jörg Osterrieder
- Degree: Master of Science (Business Administration)
- University: University of Twente
- Year: 2023
- Status: Working Paper
Summary
Abstract
Small-cap equities represent a smaller percentage of the total market capitalization of the USA, nevertheless it is worth researching on this equity class due to its characteristics and higher expected returns. However, higher volatility and sensibility to economic growth might be expected. Therefore, the relationship between macroeconomic factors and the returns of the Russell 2000 are analyzed. The Russell 2000 tracks the performance of the 2000 smallest stocks in the USA and therefore is representative for the US small cap market. An OLS regression will be conducted with logarithmic returns of the Russell 2000 as dependent variables and several macroeconomic variables as independent variables. Macroeconomic variables and return data between 2003 and 2023 will be used for the regression model. Statistically significant results were found for a small part of the total variables included. Positive statistically significant results were found for retail sales at a 5% significance level, and for consumer confidence at the 1% confidence level. Negative relationships were found for industrial production at the 5% confidence level.