AN EMPIRICAL INVESTIGATION OF MACROECONOMIC VARIABLES IN EXPLAINING STOCK RETURNS

Every nation's economic development is directly impacted by volatility in its stock market. In this paper, we have examined the relation between expected returns and measures of systematic risk stemming from macroeconomic factors for a different time period. The research aims to identify) factors which influence stock returns evolution and security portfolio performance. Further on, we examined the relative significance of each variable in explaining stock returns and finally we developed a multi-index model for Romanian firms trading at the BVB that can be used to monitor performance of security returns of portfolios by investors and managers.