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A number of academic studies have shown that markets can be "shocked" by macro economic events. A sudden rise in inflation, interest rates, oil prices, just to name a few, can have a material effect on stock prices. In the study we use Bloomberg's Market Factor Model to determine the impact on stock and sector returns for the U.D. Flyer Fund. The Market Factor Model can identify response functions i.e. Betas between S&P 500 stocks and an exogenous variable like interest rates. We will study the impact of rising market volatility (VIX), rising interest rates (10 Yr T-Note) and oil prices on Flyer Fund stocks and S&P 500 sectors. Since the Flyer Fund sector weights are usually different from the S&P 500 sector weights, we can determine if the Flyer Fund sector allocation strategy creates alpha. Moreover because the impact on individual stocks can be compared to the sector impacts, we can also determine whether our stock selection strategy creates alpha. It is hoped the study will help to improve the weightings of sectors and the selection of stocks in the UD Flyer Fund.
Robert Dean, Trevor Collier
Primary Advisor's Department
Economics and Finance
Stander Symposium poster
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"The Impact of Exogenous Macro Economic Events on Flyer Fund Stock and Sector Returns" (2014). Stander Symposium Projects. 516.
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