Determinants of stock prices : Evidence from the Automotive Industry

Contrary to previous academic inquiries of stock price determination assessing the explanatory power of a distinct category of variables, this paper explores a comprehensive array of potential determinants of four automotive manufacturers’ (Ford, Honda, Toyota and Tesla) share price. Using OLS regressions on daily panel data, spanning from January 2007 to December 2017, we investigate the effect of three macroeconomic variables : interest rates, inflation and the U.S. Dollar/Euro exchange rate and three microeconomic factors namely, firms’ P/E ratio, Tobin’s Q and Board size, on stock prices. Our ultimate contribution is the investigation of 13 major vehicle recall announcements on Ford Motor’ stock price using a dummy variable approach which contrasts with the event study methodology mostly followed in the literature. Results point toward a high significance of these factors to explain variations in share price, except for the OLS investigation of major recall announcements which proves to be not significant. Notwithstanding low external validity, we deem the analysis to provide valuable insights to actors in the automotive industry, shareholders and prospective investors.