Dolinar, Denis; Orsag, Silvije; Suman, Paola
December 2015
UTMS Journal of Economics;Dec2015, Vol. 6 Issue 2, p185
Academic Journal
This paper empirically examines the well-known Chen-Roll-Ross model on the Croatian stock market. Modifications of definitions of the Chen-Roll-Ross model variables showed as necessary because of doubtful availability and quality of input data needed. Namely, some macroeconomic and market variables are not available in the originally defined form or do not exist. In that sense this paper gives some alternative definitions for some model variables. Also, in order to improve statistical analysis, in this paper we have modified Fama-MacBeth technique in the way that second-pass regression was substituted with panel regression analysis. Based on the two-pass regression analysis of returns of 34 Croatian stocks on 4 macroeconomic variables during the seven-and-half-year observation period the following conclusion is made. In contrast to the results of Chen, Roll and Ross (1986) for the U.S. stock market, their model is not successful when describing a risk-return relation of Croatian stocks. Nevertheless, one observed version of the Chen-Roll-Ross model showed certain statistical significance. Namely, two risk factors in that version of the model were statistically significant: default premium, measured as risk premium for the corporate short-term bank loan financing, and term structure premium, measured on short-run basis.


Related Articles

  • A Generalized Autoregressive Conditional Heteroskedasticity Model of the Impact of Macroeconomic Factors on Stock Returns: Empirical Evidence from the Nigerian Stock Market. Nkoro, Emeka; Uko, Aham Kelvin // International Journal of Financial Research;Oct2013, Vol. 4 Issue 4, p38 

    The study examines the impact of domestic macroeconomic variables on the Nigeria's stock market returns, using Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model and annual data (1985-2009). We investigate the ability of these variables to predict the level of the stock...

  • The relationship between conditional stock market volatility and conditional macroeconomic volatility Empirical evidence based on UK data. Morelli, David // International Review of Financial Analysis;2002, Vol. 11 Issue 1, p101 

    Focuses on a study which determined the relationship between conditional stock market volatility and conditional macroeconomic volatility based upon monthly data from the United Kingdom from January 1967 to December 1995. Review of related literature; Description of data; Discussion on test...

  • Equity Valuation Cannot Outgrow the Economy Over the Long Run. Han, Jian-Chiu // Business Economics;Jul2000, Vol. 35 Issue 3, p53 

    Over the very long term the total dividend and capitalization of an economy's equity market should grow at the same rate as the GDP. Using this relationship, the expected total return to the equity market is the sum of the expected GDP growth rate and current dividend yield. Long-term U.S....

  • The effect of macroeconomic variables on stock market returns in developing markets. Kwon, Chung S.; Bacon, Frank W. // Multinational Business Review (St. Louis University);Fall97, Vol. 5 Issue 2, p63 

    Discusses the results of a study which was conducted to investigate the relationship between stock market returns and macroeconomic variables in the Korean stock market. Why Korea was selected for the case study; What the study revealed; Analysis of data collected; Information as it relates to...

  • Managing uncertainty. Gray, Simon // International Money Marketing;Jun2003, p17 

    Focuses on the trends in the asset management industry in Europe. Impact of unfavorable equity market and macroeconomic environment on the industry; Consumers' perception on active management products; Emergence of exchange-traded funds; Success of guaranteed funds; Cost of portfolio turnover. ...

  • Can Macroeconomic Volatility affect Stock Market Volatility? The case of 5 Central and Eastern European Countries. BAROIAN, Elena-Felicia // Romanian Journal of Fiscal Policy;Jul-Dec2014, Vol. 5 Issue 2, p41 

    This paper examines whether macroeconomic instability can influence stock market volatility in a sample of 5 emerging European countries. To account for the effects of fundamentals, modified ARCH/GARCH models are employed. The results are discordant from one country to another, but when a...

  • Cultural Distance and Stock Market Performance: A TSCS Analysis. Rahman, Matiur // Wealth: International Journal of Money, Banking & Finance;Jan-Jun2015, Vol. 4 Issue 1, p4 

    This paper investigates the influences of four dimensions of Hofstede's cultural distance using the Time Series and Cross-sectional (TSCS) analysis. Data on stock market indices of 36 selected advanced and advancing countries for a 15-year period spanning over 1997 through 2012 are employed. As...

  • A Panel Data Analysis of the Impact of Macroeconomic Indicators on Firms' Shares Performance in Nigeria. Ogunmuyiwa, Michael S.; Akinlo, Olayinka O. // EuroEconomica;2016, Vol. 35 Issue 2, p119 

    This paper contributes to the ongoing debate on whether the impact of macroeconomic indicators on the stock market is positive or negative or of no effect by analyzing the relationship between macroeconomic fundamentals and performance of quoted firms on the Nigeria Stock Exchange market. A...

  • E-BOND TRADING: THE COMING BATTLE BETWEEN BUY-SIDE FIRMS, DEALERS AND INDEPENDENTS. Kite, Shane // Securities Industry News;06/12/2001 Supplement, Vol. 13 Issue 24, p8 

    Focuses on the competition in electronic bond trading among buy-side firms, dealers and independents. Improbability of Securities Exchange Commission-inspired companies to compete in the market; Success of TradeWeb in bond trading; Impact of liquidity on business success.


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics