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The Effect of German Yield Curve Inversion on the German, Dutch, and Swiss Stock Markets

Nuijten, Maurik Maria LU and Jensterle Kavka, Karla LU (2024) NEKN02 20241
Department of Economics
Abstract
This study examines the relationship between the German yield curve and stock market performance in Germany, the Netherlands, and Switzerland by extending the Fama-French Five Factor Model with Carhart's Momentum factor and a yield curve factor. Three hypotheses are tested: the positive relationship between changes in the yield curve and excess stock returns, the lagged effect of yield curve changes, and the asymmetric effects of yield curve changes. The research shows that the German yield curve has a significant positive relationship with stock market performance in Germany and the Netherlands, particularly for the DAX, AEX, and ASCX indices. However, the relationships with Swiss indices are found to be statistically insignificant. The... (More)
This study examines the relationship between the German yield curve and stock market performance in Germany, the Netherlands, and Switzerland by extending the Fama-French Five Factor Model with Carhart's Momentum factor and a yield curve factor. Three hypotheses are tested: the positive relationship between changes in the yield curve and excess stock returns, the lagged effect of yield curve changes, and the asymmetric effects of yield curve changes. The research shows that the German yield curve has a significant positive relationship with stock market performance in Germany and the Netherlands, particularly for the DAX, AEX, and ASCX indices. However, the relationships with Swiss indices are found to be statistically insignificant. The results offer insights into the influence of yield curve dynamics on stock markets which is of interest to investors and policymakers. (Less)
Please use this url to cite or link to this publication:
author
Nuijten, Maurik Maria LU and Jensterle Kavka, Karla LU
supervisor
organization
course
NEKN02 20241
year
type
H1 - Master's Degree (One Year)
subject
keywords
Yield Curve, Stock Market, Yield Curve Inversion, Fama-French asset pricing model
language
English
id
9170542
date added to LUP
2024-08-12 15:58:59
date last changed
2024-08-12 15:58:59
@misc{9170542,
  abstract     = {{This study examines the relationship between the German yield curve and stock market performance in Germany, the Netherlands, and Switzerland by extending the Fama-French Five Factor Model with Carhart's Momentum factor and a yield curve factor. Three hypotheses are tested: the positive relationship between changes in the yield curve and excess stock returns, the lagged effect of yield curve changes, and the asymmetric effects of yield curve changes. The research shows that the German yield curve has a significant positive relationship with stock market performance in Germany and the Netherlands, particularly for the DAX, AEX, and ASCX indices. However, the relationships with Swiss indices are found to be statistically insignificant. The results offer insights into the influence of yield curve dynamics on stock markets which is of interest to investors and policymakers.}},
  author       = {{Nuijten, Maurik Maria and Jensterle Kavka, Karla}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Effect of German Yield Curve Inversion on the German, Dutch, and Swiss Stock Markets}},
  year         = {{2024}},
}