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Do macroeconomic factors matter for stock returns? Evidence from estimating a multifactor model on the Croatian market

Factor models observe the sensitivity of an asset return as a function of one or more factors. This paper analyzes returns on fourteen stocks of the Croatian capital market in the period from January 2004 to October 2009 using inflation, industrial production, interest rates, market index and oil prices as factors. Both the direction and strength of the relation between the change in factors and returns are investigated. The analyses included fourteen stocks and their sensitivities to factors were estimated. The results show that the market index has the largest statistical significance for all stocks and a positive relation to returns. Interest rates, oil prices and industrial production also marked a positive relation to returns, while inflation had a negative influence. Furthermore, cross-sectional regression with the estimated sensitivities used as independent variables and returns in each month as dependent variables is performed. This analysis resulted in time series of risk premiums for each factor. The most important factor affecting stock prices proved to be the market index, which had a positive risk premium. A statistically significant factor in 2004 and 2008 was also inflation, marking a negative risk premium in 2004 and a positive one in 2008. The remaining three factors have not shown as significant.

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between telework and non-telework companies: * the amount of depreciation of intangible and tangible assets, * EBIT, i.e. pre-tax profits and interest – there are no demonstrable differences in the profit or loss between telework and non-telework companies, * gross cash flow, * coverage of fixed assets, * return on assets, * return on sales, * labour productivity from personnel costs. Some indicators, however, were very interesting. For example, in case of capital ratio of total assets, which works with the total amount of fixed assets and the total amount of total

’s earnings before interests, tax, depreciation, and amortization (EBITDA) and previous year’s EBITDA divided by previous year’s EBITDA Growth of net result GRNR The difference between the net result and previous year’s net result divided by previous year’s net result Return on assets ROA Ratio of the net result to the total of assets Return on assets 2 ROAE Ratio of the EBITDA to the total of assets Return on sales ROS Ratio of the net result to the total of sales Return on sales 2 ROSE Ratio of the EBITDA to the total of sales Return on equity ROE Ratio of net result to

resource efficiency that serves as the main criterion for capital allocation in a market economy. This includes, in particular, the following indicators ( Zalai et al. 2010 ; Hajdúchová, 2000 ): Return on assets ROA , which expresses the overall efficiency of the company, its production power. The following formula is used to calculate the return on assets: (1) ROA = Net   Income Total   assets ROA = {{Net\;Income} \over {Total\;assets}} Return on equity ROE , which expresses the return on equity of an enterprise. The relationship for the calculation of Return on

t 2 $$\lambda \sigma _{t}^{2}$$ is the time-varying risk premium parameter. A positive risk premium λ indicates that asset returns are positively related to their volatility. That is to say, a positive risk premium value denotes that there is a positive relationship between the mean and the variance of asset return [ Rossi, 2004 ]. Asymmetric models were also employed to capture the leverage effects or the asymmetric responses to negative and positive shocks. In simple words, asymmetric models can help in determining whether the influence of a negative shock to