Michael Anthony Capicotto, Evan J Willmann



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Most financial economists agree that macroeconomic factors, as exogenous variables, must be included in asset pricing models in order to explain the variation in expected returns. In this study, I test the hypothesis that Gross Domestic Income (GDI) explains stock market price movements over time. I use linear regression analysis to identify the covariation between GDI and the top ten stocks by market value in the following SPDR sectors; (1) Healthcare, (2) Consumer Discretionary, (3) Information Technology, and (4) Industrials. Based on the regression coefficients (B), I develop portfolio weights for the stocks within each sector, with higher weights given to stocks with higher B coefficients. Assuming a $1,000,000 investment in each sector portfolio, I calculate returns for the years 2009 - 2017. I also calculate out of sample returns for the first two months in 2018. The benchmark portfolio used to determine excess returns is the SPDR ETF SPY.

Publication Date


Project Designation

Independent Research

Primary Advisor

Tony S. Caporale, Robert D. Dean

Primary Advisor's Department

Economics and Finance


Stander Symposium project

Gross Domestic Income and Stock Returns: An Empirical Analysis, 2009-2017