CAUSALITY BETWEEN DOW JONES TRANSPORTATION INDEX, CPI TRANSPORTATION INDEX AND TRANSPORTATION SERVICES INDEX

Abstract

Purpose - The purpose of this study is to bridge stock index, consumer price index, and services index in transportation sector. This paperprovides an empirical evaluation of causal relations between transportation measures and their financial side as a pioneering study.Methodology - This study uses monthly data for our research exercise including United States for twenty-one years, from January 2000until June 2018. The variable of interest include Dow Jones Transportation Stock Index (DJT), Consumer Price Index: Transportation (CPIT),and Transportation Services Index (TSI).Findings- The results indicate that the causality relations are bi-directional between all variables (i) DJT and TSI, (ii) DJT and CPIT, and (iii)TSI and CPIT.Conclusion- In this paper, it is argued that the determination of a causal link between transportation measures and their financial side, andthe nature of Granger-causality may have an important policy implication for policy makers, portfolio investors, and actors intransportation sector. The strong tendency to show bi-directional Granger-causality running between variables indicates the potentiallyimportant role of transportation in stimulating finance and vice versa.