Advanced

The influence of macroeconomic factors on the stock markets in the Baltic countries and Western Europe - A comparison

Markevicius, Andrius LU and Giniunaite, Lina LU (2016) NEKN02 20161
Department of Economics
Abstract
The relationship between the stock market and the condition of a country’s economy is a relevant topic in the recent economic and financial studies. Therefore, the purpose of our thesis is to investigate in finding long-term and short-term relationships between the stock market and macroeconomic variables in the three Baltic countries and compare the results with three more economically developed Western European countries such as Germany, Italy and UK. To achieve our goal, we apply three methods: Johansen cointegration test, vector error correction model (VECM) and Granger causality test. The results from cointegration test reveal that long-term relationship exists between the variables. VECM shows that the number of significant... (More)
The relationship between the stock market and the condition of a country’s economy is a relevant topic in the recent economic and financial studies. Therefore, the purpose of our thesis is to investigate in finding long-term and short-term relationships between the stock market and macroeconomic variables in the three Baltic countries and compare the results with three more economically developed Western European countries such as Germany, Italy and UK. To achieve our goal, we apply three methods: Johansen cointegration test, vector error correction model (VECM) and Granger causality test. The results from cointegration test reveal that long-term relationship exists between the variables. VECM shows that the number of significant macroeconomic determinants of the stock market index is not noticeably higher in more developed European countries. Money supply is the dominant factor in explaining the
changes in the stock market in the Baltic countries and interest rate – in Western European countries. The main findings from Granger causality test which is applied to the two subsamples – before and after the economic crisis are as follows: more significant relationships between stock index and macroeconomic variables occur after the crisis for the Baltic countries and the Western European countries – before the crisis. (Less)
Please use this url to cite or link to this publication:
author
Markevicius, Andrius LU and Giniunaite, Lina LU
supervisor
organization
course
NEKN02 20161
year
type
H1 - Master's Degree (One Year)
subject
keywords
Macroeconomic variables, Stock indices, Johansen cointegration test, VECM, Granger causality test
language
English
id
8877624
date added to LUP
2016-06-13 14:08:12
date last changed
2016-06-13 14:08:12
@misc{8877624,
  abstract     = {The relationship between the stock market and the condition of a country’s economy is a relevant topic in the recent economic and financial studies. Therefore, the purpose of our thesis is to investigate in finding long-term and short-term relationships between the stock market and macroeconomic variables in the three Baltic countries and compare the results with three more economically developed Western European countries such as Germany, Italy and UK. To achieve our goal, we apply three methods: Johansen cointegration test, vector error correction model (VECM) and Granger causality test. The results from cointegration test reveal that long-term relationship exists between the variables. VECM shows that the number of significant macroeconomic determinants of the stock market index is not noticeably higher in more developed European countries. Money supply is the dominant factor in explaining the
changes in the stock market in the Baltic countries and interest rate – in Western European countries. The main findings from Granger causality test which is applied to the two subsamples – before and after the economic crisis are as follows: more significant relationships between stock index and macroeconomic variables occur after the crisis for the Baltic countries and the Western European countries – before the crisis.},
  author       = {Markevicius, Andrius and Giniunaite, Lina},
  keyword      = {Macroeconomic variables,Stock indices,Johansen cointegration test,VECM,Granger causality test},
  language     = {eng},
  note         = {Student Paper},
  title        = {The influence of macroeconomic factors on the stock markets in the Baltic countries and Western Europe - A comparison},
  year         = {2016},
}