Sectoral Analysis and Risk Strategies in Economic Fluctuations: A Study on the S&P 500

Bc. Maksym Fatianov

Master's thesis

Abstract:

The S&P 500 index includes 500 of the largest quoted companies in the United States and is considered to reflect the basic condition of both the American economy and the state of international markets. This index also serves a role of an overall indicator of the achievement of many sectors such as consumer goods, healthcare, finance, and technology among others. The S&P 500 indexes each component company proportional to its market capitalization, which enables the index to represent big industry actors’ impact while still indicating the fluctuations of smaller companies. This approach is helpful to make sure that the index delivers equal rigidity on the economic environment. Due to the global attention and the index’s function as the market barometer and an indicator of economic prospects, investors pay attention to movements of the S&P 500, which influences the value of securities. This thesis analyses the relationship between the performance of the S&P 500 index, macroeconomic variables, financial ratios and sentiment-based market indicators. The research aims to identify factors, which have influence on the market performance and can help in investment decision-making and formulating the investment strategy. This thesis provides a theoretical framework, combining traditional finance theories with new behavioral finance ideas, aligning it with fundamental investment principles. Using correlation, regression and sectoral analyses the research provides important insights on the predictive power of all variables, while proposing the way to apply these insights on the formulation of investment strategy. The results of the thesis aim to help different types of investors to better understand the complexity of the modern financial market and to improve their portfolio decision-making.

Abstract:

The S&P 500 index includes 500 of the largest quoted companies in the United States and is considered to reflect the basic condition of both the American economy and the state of international markets. This index also serves a role of an overall indicator of the achievement of many sectors such as consumer goods, healthcare, finance, and technology among others. The S&P 500 indexes each component company proportional to its market capitalization, which enables the index to represent big industry actors’ impact while still indicating the fluctuations of smaller companies. This approach is helpful to make sure that the index delivers equal rigidity on the economic environment. Due to the global attention and the index’s function as the market barometer and an indicator of economic prospects, investors pay attention to movements of the S&P 500, which influences the value of securities. This thesis analyses the relationship between the performance of the S&P 500 index, macroeconomic variables, financial ratios and sentiment-based market indicators. The research aims to identify factors, which have influence on the market performance and can help in investment decision-making and formulating the investment strategy. This thesis provides a theoretical framework, combining traditional finance theories with new behavioral finance ideas, aligning it with fundamental investment principles. Using correlation, regression and sectoral analyses the research provides important insights on the predictive power of all variables, while proposing the way to apply these insights on the formulation of investment strategy. The results of the thesis aim to help different types of investors to better understand the complexity of the modern financial market and to improve their portfolio decision-making.

Keywords

S&, P 500, Correlation analysis, Regression analysis, Sectoral analysis, Risk management, Risk strategy, Economic fluctuations, Macroeconomic indicators, Investment strategy, Financial market, Stock market performance, Behavioral finance, Market cycles, Economic uncertainty

Language used: English

Date on which the thesis was submitted / produced: 11. 4. 2025

Thesis defence

• Date of defence: 10. 6. 2025
• Supervisor: Ing. Eva Kostikov, Ph.D.
• Reader: Ing. Miroslav Pavlák, Ph.D.

University of Finance and Administration

Master programme / field:
Economics and Management / Economics and Management