Creation and application of a comparative financial index for the Australian fast-moving consumer goods (FMCG) industry

Abstract

Fast-moving consumer goods (FMCGs) are food and non-food daily consumer items that are exhausted when used once and thus have short lifespans. Purchase of these items is typically a result of small-scale consumer decisions. Research in this thesis explores the similarities between value sales volatility in the FMCG industry and that of commodities traded on financial markets. The research is based on the imminent need and opportunity to identify and quantify the value sales volatility of brands traded in retail stores in Australia and aims to gain an increased understanding of brands' overall performance. Specifically, this thesis seeks to answer the question: What are the antecedents of brands' sales volatility in the Australian retail sector and how do they influence brand performance overall? To this end, a "Brands Index", analogous to financial market indices such as the S&P500 and All Ordinaries Indices, is created to test the conceptual framework. The importance of the creation of a Brands Index in the FMCG industry in Australia is absolute. The index itself represents an excellent contribution to the management and marketing disciplines as it allows any brand or set of brands to be compared against the overall market (represented by the Brands Index). This thesis theorises a market index for the FMCG industry in Australia and measures and captures its observed volatility clustering by using ARCH-GARCH models and CAPM theory to calculate brand betas. Two competing methodologies will be advanced to calculate returns; namely, with and without the presence of an equivalent risk-free rate of return. From these two methodologies, only returns including the risk-free rate are shown to successfully pass the CAPM test.

Date of Award	2018
Original language	English