بررسی تاثیر اخبار اقتصاد کلان بر پرتفوی صنعت محصولات جنگل ایالات متحده در سراسر چرخه کسب و کار : 1963-2010
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Forest Policy and Economics, Volume 28, March 2013, Pages 15–22
Macroeconomic news is viewed as the source of systematic risk in financial markets. This study investigated the impact of macroeconomic news on the returns and volatilities of the lumber and paper industry portfolios in the United States over 1963–2010. Using ARMA-EGARCH models, we examined the impact of consumer price index (CPI), industrial production (IP), and unemployment (UNEMP) on daily industry portfolios. Empirical results indicated the existence of volatility clustering and leverage effect in the industry portfolios. The same macroeconomic news had different impacts on the lumber and paper industry portfolios. The lumber industry was more responsive to the IP and UNEMP news, whereas the paper industry was more responsive to the CPI news. The impact of macroeconomic news on industry portfolio returns and volatilities varied across business cycles. Negative shocks had greater impact on portfolio volatilities in recessions than in expansions.
The forest products industry as one of the top ten manufacturing industries plays an important role in the United States. However, its financial performance has been volatile in recent decades (Mei and Sun, 2008). The financial performance of the forest products industry has been investigated through a variety of asset pricing models. From the portfolio perspective, Sun and Zhang (2001) assess the financial performance of medium and large size portfolios of forest industry firms with capital asset pricing model (CAPM) and arbitrage pricing theory and conclude that both portfolios seemed unable to earn risk-adjusted returns between 1986 and 1997. With respect to individual forest companies, Niquidet (2010) examines forty-five forest industry firms by CAPM and Fama–French three-factor model and find that the forest sector has not earned the cost of equity over 2003–2008. Overall, previous studies examine the relationship between the risk-adjusted excess return and systematic risk. Macroeconomic news, the unanticipated part of economic indicators, is usually viewed as the source of systematic risk. Therefore, the relationship between macroeconomic news and asset returns has been examined to understand how investors are compensated for bearing the systematic risk. Based on the semi-strong form of efficient market hypothesis, stock prices reflect all publicly available information and adjust instantly to reflect new information. The fundamental reason for this price adjustment is that changing economic information usually affects the discount rate, or the expected future cash flow, or both. The key study by Chen et al. (1986) finds that macroeconomic indicators such as industrial production and inflation are risks rewarded in stock markets. Other studies indicate that state variables such as gross domestic product (GDP) should be considered in asset pricing models (Merton, 1973). Furthermore, macroeconomic news released periodically is known to create market volatility (Jones et al., 1998). Some macroeconomic news may increase the heterogeneity of beliefs since market participants have different responses to the news. Therefore, it is important for market participants and academic researchers to understand the relationship between macroeconomic news and asset returns. The forest products industry portfolio is affected by states of the economy to a great extent (Sadorsky and Henriques, 2001). The lumber and wood products industry usually involves the production and development of raw materials for other industries. The lumber sector is sensitive to changes across business cycles because it supplies materials for the housing construction industry which mainly depends on the state of the economy. Moreover, prices of raw materials are largely demand driven. When the economy is on the upswing, the rising demand can lead to higher prices and vice versa. For the paper industry, its allied products are essential components in modern life. This industry is also related to the state of the economy and crucial to the U.S. economy. Overall, the forest products industry portfolio is sensitive to macroeconomic conditions. Given that few rigorous studies have been conducted regarding the relationship between macroeconomic news and the forest products industry portfolio, the overall objective of this study was to investigate the impact of macroeconomic news on the U.S. lumber and paper industry portfolios across business cycles over 1963–2010. First, the response of daily returns of these two industry portfolios to macroeconomic news was investigated. Specifically, the lumber and paper industry portfolios were examined and their reaction to macroeconomic news was compared. The well-known regularly released macroeconomic news was considered in this study because it was widely watched and then passed homogeneously through the market. Next, the impacts of macroeconomic news on the forest products industry portfolio returns and volatilities were simultaneously assessed. Previous studies assume a constant volatility and examine the impact of macroeconomic news on stock returns. However, this assumption is not realistic because the volatility may vary over time. A common feature of financial time series is the existence of the volatility clustering. That is, large changes of returns tend to be followed by large changes and small changes tend to be followed by small changes (Mandelbrot, 1963). Hence, the use of the ordinary least squares may not be appropriate if this occurs. On the other hand, volatility is unobservable and, therefore, we need a model to quantify it. The EGARCH-type model facilitates the simultaneous examination of the impacts of news on portfolio returns and volatilities. Whether the impact of macroeconomic news on the forest products industry portfolio varied across business cycles was further examined. Previous studies find that the responses of stock markets are different depending on the state of the economy, i.e., expansions or recessions (Blanchard, 1981). For instance, McQueen and Roley (1993) find that the stock market responds negatively to news about the industrial production when the economy is in expansion. Additionally, Boyd et al. (2005) find that stock prices could respond positively to a rising unemployment rate during economic expansions, whereas they might react negatively to the same news in recessions. Hence, the impact of macroeconomic news on the lumber and paper industry portfolios across business cycles was compared in this study. Our study extended previous research in the following ways. First, disaggregated industry portfolios were used to analyze the impact of macroeconomic news across the forest products industries, given the fact that earlier studies concentrate on aggregate indices such as S&P 500 and assess market-wide responses (Ewing, 2002, Boyd et al., 2005, Funke and Matsuda, 2006 and Hanousek et al., 2009). Industry level data can shed some light on how different industries react to macroeconomic news. Second, high-frequency (daily portfolio) returns of the forest products industry portfolio were employed in this study in contrast to previous studies using low frequency data such as monthly and quarterly returns (Ewing, 2002). Lastly, leverage effect was investigated to understand the asymmetric impact of positive and negative shocks on industry portfolio volatilities. In sum, our study can help market participants make decisions across business cycles as well as assist academic researchers in identifying sources of the systematic risk. The rest of this paper was organized as follows. Section 2 reviewed the literature on how financial markets were affected by macroeconomic news. Section 3 described the ARMA-EGARCH model. Section 4 presented data, including NBER business cycles, macroeconomic indicators, and forest products industry portfolios. Section 5 reported the empirical results and Section 6 consisted of discussion and concluding remarks.
نتیجه گیری انگلیسی
The forest products industry is one of the top manufacturing industries that contribute most to the economic development in the United States. However, it has experienced declining cycles and volatile financial performance over the past several decades. This paper focused on the role that macroeconomic news played in the U.S. lumber and paper industries across business cycles. Using ARMA–EGARCH models, we examined the impact of three macroeconomic news on the returns and volatilities of the lumber and paper industry portfolios over 1963–2010. The lumber and paper industry portfolios had positive returns during expansionary periods and negative returns during recessionary periods. In terms of volatility, all of them had low volatilities in expansions and high volatilities in recessions. This pattern implied that the state of the economy played an important role in the financial performance of the forest products industry portfolios. In addition, we provided some evidence for volatility clustering in forest products industry portfolios. This finding not only suggested that incorporating macroeconomic news in the forest products industry may have led to persistent volatility but also provided some evidence for industry-specific rather than market-wide responses. Asymmetric effects of positive and negative shocks on the forest products industry were detected in this paper. The estimated coefficients from ARMA–EGARCH models suggested that the volatility of forest products industry portfolios with negative shocks was higher than that with positive shocks. This was probably because negative shocks would increase the debt-to-equity ratio, thus making the corresponding asset more risky. Conditional on the same macroeconomic news, the impact on the paper industry portfolio was more asymmetric than that on the lumber one in expansions, indicating that the paper industry was more sensitive to negative shocks. The finding of the leverage effect was consistent with previous studies about the impact of macroeconomic news (Engle and Ng, 1993). Furthermore, the response to the same macroeconomic news was also asymmetric across business cycles since negative shocks had greater impact in recessions than in expansions. Hence, market participants need to pay attention to these asymmetric effects when considering the forest products industry stocks. The impact of macroeconomic news on industry portfolio returns and volatilities varied across business cycles. According to our empirical results, CPI news had a positive impact on the portfolio returns in expansions and a negative impact in recessions, whereas it decreased portfolio volatilities in expansions and increased them in recessions. Although UNEMP news affected portfolio returns negatively in both expansions and recessions, the magnitude of the impact was much higher in recessions. By contrast, IP news decreased portfolio volatilities in expansions and increased them in recessions. However, IP news had no significant impact on the paper industry portfolio. Our results confirmed that the responses of the lumber and paper industry portfolios to macroeconomic news varied depending on the state of the economy and the type of macroeconomic news. It should be noted that the macroeconomic news had insignificant impacts on the industry portfolios during the recession. This was because the stock trading volume was thin when the economy was bad so that the news was ineffective on stock returns and volatilities. In summary, this study provided some evidence that macroeconomic news was an important driver for the lumber and paper industries, whose effects depended on the nature of macroeconomic news. For example, the CPI news may have direct impact on the discount rate, while the IP and UNEMP news may have direct effect on the expected cash flow. The effects also implied that the macroeconomic news was priced into the stock return and volatilities as risks. Moreover, the explanatory power of macroeconomic news on portfolio returns and volatilities varied across the forest products industries, indicating distinct structures and operations in different industries. The performance of the forest products industry varied with changing economic conditions, so market participants should adjust to these market shifts by considering different scenarios such as expansions and recessions. Our study can be extended in the following ways. The switching regime GARCH model (Hamilton and Susmel, 1994) can be employed to identify periods of expansions and recessions. The cointegration and error correction model can be used to examine the long- and short-run impacts of macroeconomic news on industry portfolios.