Drivers of S&P 500’s Profitability: Implications for Investment Strategy and Risk Management

Marek Nagy (), Katarina Valaskova (), Erika Kovalova and Marcel Macura
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Marek Nagy: Department of Economics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, Univerzitna 1, 010 26 Zilina, Slovakia
Katarina Valaskova: Department of Economics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, Univerzitna 1, 010 26 Zilina, Slovakia
Erika Kovalova: Department of Economics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, Univerzitna 1, 010 26 Zilina, Slovakia
Marcel Macura: Department of Economics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, Univerzitna 1, 010 26 Zilina, Slovakia

Economies, 2024, vol. 12, issue 4, 1-24

Abstract: The financial markets, shaped by dynamic forces, including macroeconomic trends and technological advancements, are influenced by a multitude of factors impacting the S&P 500 stock index, a pivotal indicator in the US equity markets. This paper highlights the significance of understanding the exogenous variables affecting the index’s profitability for academics, portfolio managers, and investment professionals. Amid the global ramifications of the S&P 500, particularly in combating the eroding purchasing power caused by inflation, investing in stock indexes emerges as a means to safeguard wealth. The study employs various statistical techniques, emphasizing a methodical approach to uncover influential variables, and using static regression and autoregressive models for immediate and time-lagged effects. In conclusion, the findings have broad practical implications beyond investment strategy, extending to portfolio construction and risk management. Acknowledging inherent uncertainties in financial market forecasts, future research endeavors should target long-term trends, specific influences, and the impact of exchange rate fluctuations on index evolution. Collaboration across regulatory bodies, academia, and the financial industry is underscored, holding the potential for effective risk monitoring and bolstering overall economic and financial market stability. This research serves as a foundational step towards enhancing market understanding and facilitating more efficient investment decision-making approaches.

Keywords: forecasting; time series; stock index; stock market; systematic factors (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2024
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