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

Abstract

<jats:p>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.</jats:p>

Elements Indicating Stock Price Movements: The Case of the Companies Listed on the V4 Stock Exchanges

“…Stock markets hold a negligible part within the financial system of the V4 countries. The banking industry in these countries is the key institutional lender of human consumption and business operations (Pražák & Stavárek, 2017).…”

“…Diverse studies on the factors influencing stock prices in the V4 countries have been conducted on the various time intervals. The study by Pražák and Stavárek (2017) claims that GDP had a negative influence the stock prices in the V4 countries. In addition, the work of Kulhánek (2012) identified negative influence of GDP on the stock prices of the Visegrad countries.…”

“…, 16}, such as Gross Domestic Product (GDP), Inflation Rate (INF), Exchange Rate (EXCH), Gold Price (GOLD), Oil Price (OIL), Business Confidence Index (BCI); β 0 is the constant term, and ε it is the standard error. The control variables (i.e., macroeconomic variables) were added to our analysis by following the prior studies discussed in the previous section (Bams et al, 2017;Pražák & Stavárek, 2017;Raza et al, 2016;Tursoy & Faisal, 2018;Vveinhardt et al, 2017;Bahmani-Oskooee & Saha, 2016;Kulhánek, 2012;Nieh & Lee, 2001). Table 1 shows the criteria for assessing the selected companies' specific characteristics, macroeconomic variables, and data sources.…”

Modeling the Equilibrium Price of the Companies Listed in the Prague Stock Exchange

“…Prague Stock Exchange (PSE) holds a small share within the total financial system of the Czech Republic (CNB, 2018). Pražák and Stavárek (2017) investigated the influence of macroeconomic elements on the stock prices of Visegrad countries. Their study indicates that in the case of Czech Republic, unemployment rate and GDP hold positive effect on the stock prices.…”

The Influence of Macroeconomic and Global Factors on the Composite Stock Price Index (CSPI) in Indonesia Stock Exchange (IDX) for the Period 2013-2017

“…Gross Domestic Product (GDP) is the value of goods and services produced by domestic and foreign at a certain time. Research conducted by Pražák & Stavárek (2017) stated that GDP has a positive effect on the CSPI.…”