The Effect of Macroeconomic and Fundamental Factors on Taiwan Stock Exchange Electronics Index and Finance Index
Date Issued
2008
Date
2008
Author(s)
Chiu, Chin-Yu
Abstract
To investigate the correlations among the macroeconomic factors, the industrial fundamental factors, Taiwan Stock Exchange Electronics Index and Finance Index, the Multiple Index Model is employed in this thesis. The macroeconomic factors consist of four variables, which are related with the international phase (U.S. rediscount rate, Nasdaq Index, and Dow Jones Index), the monetary policy phase (Monetary Aggregate M1b and M2), the financial policy phase (expenditure and bonds outstanding for government), and the financial market phase (consumer price index, foreign exchange rates, commercial paper rate, and loan rate). The industrial fundamental factors includes the electronic industry revenue, the manufacturing revenue, the loan balance, and the over due ratio. Besides, the dummy variables are used to exam the impact of big events on Electronics Index and Finance Index. The monthly data are collected since 1995 to 2007. The empirical results are described as follows.. M1b and M2, the foreign exchange rates, Nasdaq Index, and Dow Jones Index affect Taiwan Stock Exchange Electronics Index and Finance Index significantly. Besides, the electronic industry revenue is another significant factor on Taiwan Stock Exchange Electronics Index. Furthermore, The earlier stage of the Taiwan Stock Exchange Finance Index affects the current financial index significantly also.. Considering the joint effect in regression model, the cross term of big event in short term and the foreign exchange rate affects for both Taiwan Stock Exchange Electronics Index and Finance Index significantly. Besides, the cross term of U.S. rediscount rate, which represents the U.S. Fed’s monetary policy, and Nasdaq Index has a negative impact on Taiwan Stock Exchange Electronics Index significantly. In addition, the cross term of the government expenditure and the electronic industry revenue has a positive impact on Electronics Index. That implies the expanded financial policy of government is helpful to the electronic industry. Finally, the cross term of the government bonds outstanding and long-term loan rate has a significant impact on Finance Index. It implies that the money demand increases if the government bonds increase. Thus, the long-term loan rate increases to a high level. That benefits the finance industry and stimulates Financial Index to rise.. Using the best model to predict Taiwan Stock Exchange Electronics Index and Financial Index shows that the difference between the predicted value and actual value becomes large if the market volatility varies tremendously. On the contrary, the difference would be small if the market volatility varies little.
Subjects
Money Supply
Rate
Industrial Fundamental Factors
Stock Index
Unit Root Test
Big Event
Type
thesis
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