Brandon Capicotto



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Since the early 90's, a number of financial condition indexes have been developed to determine future movementsin the non-financial sectors of the economy. In this study, I use the Kansas City Federal Reserve's index of financial Stress (KCFSI) to study the relationship between market and sector price movements and macro financial conditions. The periods of analysis are :(1)2001-2012), (2) 2003-2007,(3) 2009-2012). The long run period includes two recessions and two sustained periods of economic growth. The two short run periods represent economic rebound periods after the recessions. Using uni-variate regression models regress KCFSI on Spy, the S&P 500 ETF, as well as 10 S&P sector ETF's. Monthly data is used in the regressions. Since increases in KCFSI indicate greater financial stress, I will test the hypothesis that an inverse relationship exists between KCFSI and the market price indexes i.e., the slope coefficient b is < than 0. 2013 will be used as the out of sample forecasting period.

Publication Date


Project Designation

Independent Research

Primary Advisor

Robert Dean, Trevor Collier

Primary Advisor's Department

Economics and Finance


Stander Symposium project


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An Empirical Study of the Relationship Between Stock Market Price Movements and Macro Financial Conditions, 2001-2013