ISM NMI and Stock Returns

Posted in Economic Indicators

 

Each month, the Institute for Supply Management (ISM) compiles results of a survey “sent to more than 375 purchasing executives working in the non-manufacturing industries across the country.” Based on this survey, ISM computes the Non-Manufacturing Index (NMI), “a composite index based on the diffusion indexes for four…indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries.” ISM releases NMI for a month on the third business day of the following month. Does the monthly level of NMI or the monthly change in NMI predict U.S. stock returns? Using monthly¬†NMI data and monthly closes of the S&P 500 Index from January 2008 through June 2013 (only 66 months), we find that: (more…)

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