The Relationship Between Macroeconomic Variables and Sector Indices : An empirical investigation of the Swedish stock market

Sammanfattning: This study hypothesizes a relationship between different stock market sector indicesand their relationship to macroeconomic variables. Previous studies investigates therelationship between broad stock market indices and macroeconomic variables, with fewresearching stock market sector indices. Our results show that inflation, exchange rate,money supply, industrial production, and long-term interest rate have a significant long-run relationship with the Basic Material, Consumer Product and Service, Financial andIndustrial sector indices. We find that the Real estate, Health care, and Technologysector indices do not have a long-term relationship with macroeconomic variables. Wealso test for unexpected changes in the macro variables to see how this may affectthe long-term relationships. Here, we find that the Financial sector and Technologysector responds poorly to shocks in the macroeconomic variables and that the long-termrelationship may not return to its equilibrium if shocks to the macroeconomic variables occur.