Economic Factors Affecting The Price of Communications and Technology Stocks
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Abstract
This study is aimed at investigating economic factors that influence the price of communication and technology stocks. Monthly data were used, covering the period from January 2014 to December 2018. The study involved the estimation of long-run relationship among variables concerned under cointegration framework. Then the Error Correction Model (ECM) was used to estimate short-run adjustment of the system. The results from the study show that all variables are non-stationary at the level of data and stationary at the first difference. With this, the cointegration test can be performed to find long-run relationship among variables at the level of data. The results from the estimation of cointegration equation showed that the variables that have positive impact on the price of Communication and Technology Stocks consist of lagged Communication and Technology Stocks Index, Manufacturing Production Index and SET Index. On the other hand, factors that have negative influence on the price of Communication and Technology Stocks include Volume of Communications and Technology Stocks, M2(Money supply), Consumer Price Index, Gold Price, and Bond Yield (5-Year maturity). The next step is to estimate the Error Correction Model to study the short-run adjustment of the system which yields the following results. The estimated coefficient of the “Error Correction” term is equal to -0.556444, meaning that the system will adjust back to its equilibrium state in the following period at the rate of 55.64% of the initial deviation due to external shock.
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