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How Do Certain Economic Factors Affect Stock Prices?

In: Business and Management

Submitted By eriljw
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How Do Certain Economic Factors Affect Stock Prices?

Introduction

For our analysis, we chose to examine how different economic factors such as GDP, CPI, and unemployment affect stock prices. More specifically, we analyzed how these economic factors affected the stock prices of three different companies during the period from 2000-2009. The three companies that we chose were Exxon Mobil, Tiffany & Co, and Southwest Airlines. We chose those particular companies because each one offers products or services that represent a different degree on the price elasticity of demand spectrum. Exxon Mobil represents a company that offers a good which is inelastic. This means that no matter what economic conditions are present in the market, the quantity demand for this product is going to stay constant since consumers feel they cannot live without it. On the other hand, Tiffany & Co. represents a company that sells products which are elastic. This means that consumers will choose to buy their products depending on the conditions present in the market. Southwest Airlines represents a company that offers a service which can be viewed as both inelastic and elastic depending on the type of travel being studied. For business travelers who are required to fly for their jobs, the service that Southwest Airlines provides is inelastic since they generally have no choice in whether they fly or not. On the other hand, there are travelers who view flights as an elastic product because the reason for their travel is due to pleasure, like people who fly in order to vacation.

We will split up our analysis into three parts; we will first focus on how GDP affected the stock prices of the three different companies. We will discuss GDP and how it affects stock prices; we will also give our hypothesis as to how we think GDP would affect...

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