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International influences on Irish stock returns

Author

Listed:
  • Donal Bredin
  • Stuart Hyde

Abstract

We examine the influence of US and UK macroeconomic and financial variables on Irish stock returns in a nonlinear framework. We allow for time variation via regime switching using a smooth transition regression (STR) model. Importantly we find that both US and UK stock returns are significant determinants of Irish returns. Further,US returns are an important transition variable. Additionally,we show that both the US industrial production growth and changesin short term interest rates play an important role in explaining Irish stock returns. A two transition variable model finds that US short term interest rate changes exert a secondary nonlinear influence on Irish returns. The significance of US variables is reflective of the influence of US investment in the Irish economy.

Suggested Citation

  • Donal Bredin & Stuart Hyde, 2004. "International influences on Irish stock returns," Centre for Financial Markets Working Papers 10197/1164, Research Repository, University College Dublin.
    • Handle: RePEc:rru:cfmwps:10197/1164
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    File URL: http://hdl.handle.net/10197/1164
    File Function: First version, 2004
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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