| Summary: | 碩士 === 銘傳大學 === 財務金融學系碩士在職專班 === 102 === For lack of natural resources, Taiwan steel industry heavily depends on importing raw materials. It follows that the industry profitability is highly correlated with international prices of materials which also influence the stock return and volatility of firms in the industry. Since the bulk carrying is the main means of transporting materials, it goes without saying that the BDI (Baltic Dry Index) can be regarded as an indicator of the market status of bulk carrying. Moreover, the CRB (Commodity Research Bureau) Spot Price Index represents the indicator of general price level of raw materials, so it is also widely used in the practice. Differently from the previous literature, this thesis focuses on the effects of both indices on the stock return and volatility of firms in Taiwan steel industry before and after the reforms of contact system between steel product manufactures and mine providers. The sample data applied in this thesis is from Jan 1 2000 to Dec 31 2012.
Since the Generalized Autoregressive Conditional Hetroskedasticity (GARCH) model has been widely accepted as one of most generalized models to describe the behaviors of stock return and volatility, this thesis extended the GRACH (1,1) Model with the adoption of CRB Spot Price Index and BDI to analyze their effects on Taiwan steel index return and volatility, and on listed stocks return and volatility before and after the change of contract system. The empirical daily and monthly data include the stock indices and steel industry indices of Taiwan Stock Exchange (TWSE) and GreTai Security Market (GTSM), and 13 listed stocks of Taiwan steel industry in the TWSE. The main empirical results and their implications can be summarized as follows:
1. The descriptive statistics analyses of daily and monthly data show that the log differences of TWSE and GTSM steel industry indices, and 13 listed stocks prices are mostly leptokurtic, so they are well qualified to apply GRACH (1,1) model.
2. In additions, the mean and volatility equations of GARCH (1,1) model include log differences of TWSE and GTSM stock indices, and BDI and CRB Spot Price Index as additional explanatory variables, and the correlation coefficients among 4 variables are all below 0.4. Therefore, the extended GARCH (1,1) model has been avoided the issue of collinearity among explanatory variables.
3. The empirical results of the daily data show that:
(1). BDI, before and after the reforms of contract system, has statistically significant effect on TWSE and GTSM steel index returns, and the stock returns of China Steel Company, Tung Ho Steel Company and Feng Hsin Steel Company. These evidences may be consistent with that these stock listed companies own the operational property of vertical integration. However, such effect can’t be found from CRB Spot Price Index.
(2). Except the volatilities of TWSE and GTSM steel index returns and a few stock returns of companies, BDI and CRB Spot Price Index also show statistically significant effects on the volatilities of most listed stock returns before and after the reforms of contract system.
4. The empirical results of the monthly data show that:
(1). Neither BDI nor CRB Spot Price Index, before and after the reforms of contract system, has significant effect on the returns of all empirical data. This may attribute to stock market efficiency in a longer time interval.
(2). Similarly, the BDI also shows no statistically significant effect on the volatilities of most listed stock returns before and after the reforms of contract system. However, CRB Spot Price Index, before and after the reforms of contract system, shows statistically significant effect on the volatilities of half listed stock returns in sample, and volatilities of TWSE and GTSM steel index returns.
5. The empirical evidences obtained from this thesis could be meaningful for domestic stock investors, and also have important implications to the importers of steel mine in Taiwan. Besides, since the steel industry is the basic industry for any country all over the world, those evidences may also be useful references to the foreign investors and importers.
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