Investigating the Effects of Monetary Policy, Sentiment, and Economic Conditions on Tourism Stock Performance

This thesis examines the roles of monetary policy, sentiment, and economic conditions (business and financial) on tourism stocks' performance. The thesis is divided into three chaptersto reach this aim. In chapter 2, the role of sentiment and monetary policy (both domestic and the United States (US)) in explaining the changes in the Mexican tourism firms' stock returns. Empirical findings reveal that the changes in Mexican consumer sentiment have a stronger positive effect on tourism firms' stock returns than Mexican business sentiment changes. However, the US consumer and business sentiment are irrelevant to tourism firms' stock returns. Moreover, our results indicate that changes in the US interest rates positively influence Mexican tourism firms' stock returns. Chapter 3 examines the long-term links between business conditions, financial development, and tourism growth in major tourist destination countries selected in this study. The long-run estimation underscores that business and finance environments are significant drivers of stock price movements in this industry. Moreover, the results show that the most significant factor that explains changes in the tourism stock price is foreign tourist arrivals, indicating that the tourism stock price of major tourist countries is relatively more sensitive to changes in tourist arrivals to the country than other factors. Chapter 4 investigate the role of economic sentiment and economic policy uncertainty (both domestic and European) in explaining the changes in the contemporaneous and future travel and leisure stock index returns in top European Union tourism destinations. Empirical results reveal that the changes in regional economic sentiments predominantly and positively affected hospitality stock index returns in France and Spain, while the money supply is the primary driver in the UK. Also, our findings indicate that changes in regional economic sentiment in Spain and the United Kingdom significantly influence future hospitality stock index returns. In addition, regional economic policy uncertainty has a moderate negative influence on future stock index returns in France. Keywords: Sentiment, Monetary Policy, Financial Performance, Business Conditions, Economic Policy Uncertainty, Stock Returns.