Do industries lead stock market

1. Do Industries Lead
Stock Market?
Group Member
1. Muhammad Bilal
2. Farooq Khan

2. Our paper proceeds as follows.
In Section I, we present introduction , hypothesis & key assumptions behind our
hypothesis.(Farooq)
In Section II we describe the data.(Bilal)
In Section III we extend our analysis to the eight largest stock markets outside of
the U.S.(Farooq)
In Section IV we conclude.(Bilal)

3. SECTION I

4. Introduction
 July 16 2004.
 Stock Market Movement.
 US Stock Market.
 Over period 1946 – 2002.
 14 industries out of 34.

5. we provide a few metrics regarding the statistical and economic
significance of the documented predictability
 First
 Second
 Third

6. Hypothesis
Our analysis of whether industries lead stock markets is that the
gradual diffusion of information across asset markets leads to cross-
asset return predictability.

7. Key Assumptions
 First key assumption
 Second key assumption

8. SECTION II

9. Data
 From Ken French’s website, we obtain monthly returns to thirty-
eight value weighted industry portfolios for the years of 1946-2002.
 The REIT data only goes back to January 1972

10. SECTION III

11. Evidence form the rest
of the world

12. SECTION IV

13. Conclusion
 We find that the returns of industry portfolios are able to predict the
movements of stock markets.
 An industry’s ability to do so is strongly correlated with its
propensity to forecast indicators of economic activity.

14. Thank You!