Stock Prices: S&P 500
Exercises

Questions and Exercises

1. Briefly describe how you think the OPEC oil price shock in 1974 affected the S&P 500 index during that time. Explain your reasoning using the micro and macroeconomic tools that you have developed. Access the data set for the S&P 500 and plot the total return during 1973 and 1974. Do the data support your description? Do you think that the high oil prices of today will bring about the same result?

2. The S&P 500 is a component of the Index of Leading Economic Indicators. Briefly explain why the S&P 500 is a leading indicator of GDP and other economic activity. Was the performance of the S&P 500 during the three U.S. recessions since 1980 consistent with the S&P 500 being a leading indicator? Why?

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