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Durham University

Research & business

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Publication details for Professor Dennis Philip

Maio, P. & Philip, D. (2015). Macro variables and the components of stock returns. Journal of Empirical Finance 33: 287-308.

Author(s) from Durham


We conduct a decomposition for the stock market return by incorporating the information from 124 macro variables. Using factor analysis, we estimate six common factors and run a VAR containing these factors and financial variables such as the market dividend yield and the T-bill rate. Including the macro factors does not have a significant impact in the estimation of the components of aggregate (excess) stock returns—cash-flow, discount-rate, and interest-rate news. Using the macro factors in the computation of cash-flow and discount-rate news does not significantly improve the fit of a two-factor ICAPM for the cross-section of stock returns.