engleski

Relationship between macroeconomic fundamentals and and stock market indices in selected CEE countries

The aim of this paper is to test for the presence of informational inefficiencies on stock markets of selected CEE countries (Croatia, Czech Republic, Hungary, Poland and Slovenia) analyzing the relationship between stock market indices and macroeconomic variables. In order to test for bilateral long run equilibrium relationships between stock market index and set of macroeconomic variables, including inflation rate, broad money supply, money market interest rate and foreign currency reserves, we use Johansen cointegration method. To gain more information about market efficiency Granger causality test is employed. Results point to established long run relationship between stock market indices and macroeconomic variables, especially in case of Poland and Czech Republic. The results of Granger (non) causality tests reveal that (a) there is no causal linkage between foreign exchange reserves and money market interest rate on the one side and stock market indices on the other, (b) inflation rate leads stock index in Slovenia and Czech Republic, (c) money supply leads stock index in Czech Republic, (d) stock market index leads foreign exchange reserves in Slovenia, inflation rate in Croatia, money supply in Hungary and Poland and money market interest rate in Hungary and Czech Republic.

Stock market; macroeconomic variables; efficiency; cointegration; CEE

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