We want to study if the Purchasing Managers Index (PMI), the main indicator within the Institute For Supply Management Manufacturing Report On Business predicts future excess stock market returns. Hence, we intend to test if the leading macroeconomic indicator, the PMI, at time (t) predicts excess stock market returns at time (t+1). The time lag (t+1) is considered short-term, one to three months. To test for predictability, we will use ordinary least squares (OLS) regression models, both univariate, bivariate and pooling return predictive models. Statistical evidence such as correlation, statistical significance and economic magnitude of the coefficients, will influence whether we will be able to conclude for predictability.

Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018