Empirical Investigations On Determinants Of The UK Stock Market

Abstract

This thesis examines the determinants of the UK stock market and their interactions under periods of stress. It explores three key factors influencing stock price performance. In particular, these factors are macroeconomic variables, firms’ Environmental, Social, and Governance (ESG) ratings, and Bitcoin bubbles. The research is structured into three main objectives. First, it investigates the causal relationship between macroeconomic indicators and stock prices by employing both standard and quantile Granger causality methods to capture the variation of sectoral and economic conditions. Second, it analyzes the impact of firms’ ESG ratings on stock price crash risk using a fixed effects model to examine whether ESG factors contribute to market stability and focus on prior and post COVID-19 periods. The last objective explores the financial contagion effects of Bitcoin bubbles on stock market volatility by detecting bubble periods using the GSADF test and analysing their impact on sectoral volatility using the GARCH-X model. The findings reveal significant macroeconomic influences on stock prices with sectoral differences in causality patterns. The quantile Granger causality approach provides deeper knowledge of bidirectional relationships under varying economic conditions. ESG ratings exhibit mixed effects on stock price crash risk before and during the COVID-19 crisis and reveal sectoral variations. Bitcoin bubbles reported varying impacts on stock market volatility. Specifically, the relationship had changed from a hedging role in pre-pandemic periods to a volatility factor during crises. These results have important implications for investors, policymakers, and financial analysts. Further, it highlights the necessity for adaptive investment strategies, regulatory considerations, and risk management approaches focusing on sector-specific and economic conditions.

Date of Award	Mar 2025
Original language	English
Awarding Institution	Aston University
Supervisor	Rakesh Bissoondeeal (Supervisor) & Michail Karoglou (Supervisor)