The Impact of Crisis and Recessions on Excess Equity Return

Peer reviewed: 
No, item is not peer reviewed.
Scholarly level: 
Graduate student (Masters)
Date created: 
2018-12
Keywords: 
Capital asset pricing model
Arbitrage pricing theory
Equity excess return
Recession probability
Inflation rate
Economic growth
Economic sentiment
Composite leading indicator
Consumer sentiment index
Abstract: 

This study examines the equity excess return and the effect of financial crisis and financial recession probabilities on the excess return. In the paper, we observed the relationship of equity excess return and six different variables, which include: economic sentiment, economic growth, risk-free rate, inflation rate, recession year, and U.S. recession probability, in U.S, Canada, Brazil, Russia, and UK.

The Capital Asset Pricing Model and the Arbitrage Pricing Theory are two of the models that used most often to price the expected return of the equities. The statistical analysis in our study use the modification of the Arbitrage Pricing Theory with the purpose to explain the equity excess return in different countries that involved in our study.

The result of our study shows that after adding the new variables, which are recession probability and recession years, they actually do not have a significant effect on the equity excess return on most of the countries.

Description: 

MSc in Finance Project-Simon Fraser University

Language: 
English
Document type: 
Graduating extended essay / Research project
Rights: 
Copyright remains with the author.
File(s): 
Senior supervisor: 
Carlos da Costa
Department: 
Beedie School of Business-Segal Graduate School
Statistics: