The Czech Equity Market - Its Effectiveness and Macroeconomic Consequences
AbstractThis paper examines features of the Czech stock market’s development from 1997 to 2003 and attempts to unveil the macroeconomic consequences of stock-price development. The analysis of the stock market’s behavior supports a cautionary stance on the hypothesis of the efficient-market theory, even in its weak form. Another finding, as regards the macroeconomic consequences of stock-price development, undermined the assumption of the positive wealth effect of rising stocks. In relation to GDP growth, the prediction power of the stock index proved rather limited. The Czech stock market can also function as an instrument of portfolio diversification, at least in relative terms, since the correlation to the Czech bond market was weak. Contrariwise, the correlation among the Czech, U.S., and European stock markets increased in time, restricting the room for portfolio diversification.
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Bibliographic InfoArticle provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.
Volume (Year): 55 (2005)
Issue (Month): 5-6 (May)
behavioral finance theory; Czech equity market; effective-market theory; European integration; portfolio theory;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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