This study takes a fundamental approach to examine what share prices are driven by. Theoretically, using the dividend discount model and the discounted free cash flows model, both firm specific factors and the overall macroeconomic environment can explain movements in share prices. We empirically test the effects of macroeconomic factors (federal funds rate and unemployment rate) and firm specific factors (earnings, debt/equity ratio, market capitalization, and industry concentration) on share prices by employing panel data from 31 U.S. firms over 23 quarters ranging from the first quarter of 2009 to the third quarter of 2014. The results of the various regressions indicate that earnings, debt to equity ratio, market capitalization, federal funds rate, unemployment rate, and industry concentration do explain a portion of share price movements in certain tests, although the results are not consistent with the fundamentalist theory across different testing methods. Additionally, it appears that there are other explanatory variables that were left out of this experiment that can explain share price movements as well. Therefore, the results of this testing are inconclusive and the factors tested here cannot explain the full movements of share prices. This could be evidence of another prevailing theory regarding share price movements, the random walk theory.


Michael, Charalambos


Business Economics


Corporate Finance | Portfolio and Security Analysis

Publication Date


Degree Granted

Bachelor of Arts

Document Type

Senior Independent Study Thesis



© Copyright 2015 Michael P. Ewanechko