engleski

Relationship between macroeconomic fundamentals 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 reveal that (a) there is no causal linkage between any macroeconomic variable and stock market index in Croatia, Hungary and Poland ; (b) money supply and foreign exchange lead stock index in Czech Republic, while inflation rate and money market interest rate lead Slovene stock index (c) none of stock market indices might be used as a leading indicator of inflation rate (d) stock market index leads money market interest rate in Hungary and Czech Republic, foreign exchange reserves in Slovenia and money supply in Poland.

Stock market ; macroeconomic variables ; efficiency ; cointegration ; CEE

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