Type of Submission

Refereed Article


This study examines a long-run equilibrium relationship between economic activity and hotel stock prices. A hotel stock return model is formulated with the error correction term based on the results of the cointegration analysis. The model shows that changes in industrial production, changes in money supply and the error correction term are significant influences on hotel stock returns. The negative sign of the error correction term indicates that although the cointegrating relationship experiences the short-run deviations, the system tends to revert to the equilibrium relationship. This study highlights the importance of including the error correction term into a stock return model.