Mariam Ali Alyammahi, Siti Norbaya Yahaya, Nusaibah Mansor
This study attempts to test the effects of several risk factors on industries’ stock returns in UAE and USA by employing a multifactor pricing model. This study addresses three main questions. First, whether and to what extent are returns on local industries affected by changes in local macroeconomic risk factors? Second, whether and to what extent are there similarities and differences in different industries? Third, whether and to what extent are there similarities and differences in different markets? We examine returns of seven industries: banking, consumer staples, industrial, insurance, real estates, telecommunication, and transportation for which data is available. Empirical results indicate different relationships between macroeconomic risk factors and industries’ stock returns in each market. The results also show that some industries show more differences than others between the two markets in their stock reactions to local macroeconomic risk factors. However, all the industries in the two markets show strong reactions to local market portfolios.