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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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Abstract

The main objective of this research paper is to examine whether the practice of corporate governance (CG) measured by the CGI-Crobank® index is significant for the explanation of variations in the performance of Croatian banks measured by the return on assets, return on equity, interest margin, margin of non-interest income, operating expenses margin, and by Tobin’s Q for the observed period from 2011 to 2015. The research is made on Croatian banks that form the CGI-Crobank® index using the data and information from annual questionnaires of CG codex, primarily to ensure objectivity, standardization and comparability. The goal of the literature analysis was to show present findings in the areas of corporate reporting and its impact on CG. Results obtained in the research indicate that a well implemented practice of corporate governance measured by the CGI-Crobank® index have influence on the variations in the performance of Croatian banks measured by Tobin’s Q and financial indicators.

Uncertainty and Stock Market Returns in Pacific-Rim Countries: Evidence based on a Bayesian Panel VAR Mode. Journal of Multinational Finance Management. doi: http://dx.doi.org/10.1016/j.mulfin.2017.03.001 Diaz, E. M., & Gracia, F. (2016).Oil price shocks and stock returns of oil and gas corporations. Finance Research Letters, 1-6. doi: http://dx.doi.org/10.1016/j.frl.2016.09.010 Dielbold, F. X., & Yilmaz, K. (2009).Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets. Economic Journal, 119, 158-171. Dielbold, F. X., & Yilmaz