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How Inflation, Market Capitalization, Industrial Production and the Economic Sentiment Indicator Affect the EU-12 Stock Markets

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  • Dimitrios Subeniotis
  • Dimitrios Papadopoulos
  • Ioannis Tampakoudis
  • Athina Tampakoudi
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    Abstract

    In the present study we map the relationship between the EU-12 stock market price indices and four crucial macroeconomic factors, using panel data analysis. The examined variables are market capitalization, industrial production, the economic sentiment indicator, and inflation, while the twelve countries are those which have adopted the euro. The empirical results reveal a strong effect of the first three factors, while inflation has a negative but not statistically significant coefficient. Further, the variables that affect the stock markets positively are market capitalization and the economic sentiment indicator. Finally, an applied statistical model confirms the significant convergence of the EU-12 stock markets in the long run, indicating a low geographic diversification across European markets.

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    Bibliographic Info

    Article provided by European Research Studies Journal in its journal European Research Studies Journal.

    Volume (Year): XIV (2011)
    Issue (Month): 1 ()
    Pages: 105-120

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    Handle: RePEc:ers:journl:v:xiv:y:2011:i:1:p:105-120

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    Keywords: Stock Markets; Panel Data; Macroeconomic Fundamentals.;

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