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The Relationship Between Stock Market Development and Macroeconomic Fundamentals in the Visegrad Group

Author

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  • Pražák Tomáš

    (Ing., Silesian University in Opava, School of Business Administration in Karviná Department of Finance and Accounting, Opava,Czech Republic)

  • Stavárek Daniel

    (Prof., Ing., Silesian University in Opava, School of Business Administration in Karviná, Department of Finace and Accounting, Opava, Czech Republic)

Abstract

This study examines the effect of specific macroeconomic factors on the stock prices of selected financial sector companies listed on the Central European Exchanges (Budapest Stock Exchange, Prague Stock Exchange, Bratislava Stock Exchange, or Warsaw Stock Exchange). We investigate the nature of the causal relationships between macroeconomic factors and stock prices. The long‑term causality, tested using the Johansen cointegration test, and the short‑run dynamics between the variables, examined using the VECM model, are explored using quarterly data from the 2005-2014 period. The short‑term causality shows the possibility of time series fluctuations; however a steady state should be achieved in the long‑term. In general, we confirmed that macroeconomic fundamentals had a negative impact on stock prices. The interest rate, which also has a negative impact, is the most prominent predictor of the long‑run developments. We also found very rare examples of macroeconomic variables that explain changes in stock prices within the VECM framework.

Suggested Citation

  • Pražák Tomáš & Stavárek Daniel, 2017. "The Relationship Between Stock Market Development and Macroeconomic Fundamentals in the Visegrad Group," Comparative Economic Research, Sciendo, vol. 20(3), pages 5-23, September.
    • Handle: RePEc:vrs:coecre:v:20:y:2017:i:3:p:5-23:n:1
    DOI: 10.1515/cer-2017-0017
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    Cited by:

    1. Lukasz Zieba, 2021. "Stock Exchange Development in V4 Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 4), pages 300-307.
    2. Veronika Kajurová, 2017. "A Note on Relationship between Economic Activity and Stock Market Development: a Case of Euro Area Countries," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 65(6), pages 1953-1965.

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