The Impacts of Macroeconomic and Non-macroeconomic Variables on Stock Return Volatility: An Empirical Investigation of the Tourism Industry = The Impacts of Macroeconomic and Non-macroeconomic Variables on Stock Return Volatility: An Empirical Investigation of the Tourism Industry

다국어 초록 (Multilingual Abstract)

Volatility within the securities market is one of the factors eroding investor trust. Understanding causes that affect stock return volatility is a vital concern for investors, researchers, and portfolio managers. The ability of investors to forecast the long-run macroeconomic and nonmacroeconomic factors that affect stock volatility is extremely important in making profitable investment decisions. Researchers have been trying to understand and predict stock volatility since the global financial crisis of 2008 and its effects on stock markets and the global economy. Theories in finance have strongly related stock volatility to changes in several macroeconomic variables such as capital markets, fluctuations in interest rates, inflation rate, exchange rate, oil prices, and gold prices. Various studies have attempted to establish relations between macroeconomic factors and stock fluctuations. Chen, Roll, and Ross (1986) were the first to use macroeconomic variables to predict stock returns in the United States, using seven macroeconomic variables: term structure, industrial productivity, risk premium, inflation, market return, consumption, and oil prices. Their results showed a positive relationship between macroeconomic variables and expected stock returns. They pointed out that when these selected macroeconomic variables are extremely volatile, they can significantly explain expected returns.
Caner and Onder (2005), outline sources of stock volatility as dividend yield, exchange rate, interest rate, inflation rate, and movement of world market index. Abugri (2008); Hwang & Young (2000) identify inflation rate, interest rate, exchange rate, dividend yield, and money supply as notable factors influencing stock volatility. Volatility forecasting research has been for long a hot topic in empirical finance. Nevertheless, in the Tourism field exploring problems in volatility and their resolution across different models have received little interest and still lack proper investigations.
While macro-economic factors often affect stock volatility, Uncontrollable circumstances such as pandemics, natural disasters, political events, mega events, and economic crises could have a huge impact on stock volatility. Global tourism and economics have marked a wide range of crises and disastrous events such as the September 11 terrorist attacks (2001), the global economic crisis in 2008/2009, the eruptions of Eyjafjallajökull (2010) that hit hard the equity market and contributed to high volatility. And, the recent COVID-19 crisis has impacted heavily on international travel, tourism demand, and the hospitality industry. The relationship between the tourism industry performance and uncertain non-macroeconomic factors has received limited academic coverage.
This study sought to examine the impact of five macro-economic variables namely; interest rate, inflation rate, exchange rate, unemployment rate, and Oil price changes, and other five nonmacroeconomic variables namely; COVID-19 crisis, the U.S Presidential Election, the World Expo, FIFA World Cup, and the Olympics on the stock return volatility of airlines, hotels and restaurant firms in the U.S for a period of 11 years (January 2010 to December 2020). The study results showed that stock return volatility has a significant relationship with all macroeconomic variables. However, only unemployment rate has positively impacted stock return volatility. The results show also that among all non-macroeconomic variables, only the COVID-19 pandemic has a positive significant impact on the stock return volatility. It has been indicated that that the new coronavirus COVID-19 has dramatically affected the performance of the Tourism industry. Airlines, hotels, and restaurants reported a sharp decline in revenues after the emergence of the COVID-19 outbreak. Further explanation is discussed in the paper.