Multifactor risk and the stock returns of Canadian paper and forest products companies

This paper uses a multifactor market model to estimate the expected returns to Canadian paper and forest products stock prices. Results are presented to show that market returns, exchange rates and commodity prices each have large and significant effects on stock price returns in the Canadian paper and forest products industry. In particular, an increase in the market or commodity price factor increases the return to Canadian paper and forest products stock prices while an increase in exchange rates decreases the return to Canadian paper and forest products stock prices. Furthermore, the paper and forest products sector is riskier than the market and its moves are pro-cyclical.