Dynamic macroeconomic effects on the German stock market before and after the financial crisis

Kaan Celebi and Michaela Hönig

No 13, Working Paper Series from Frankfurt University of Applied Sciences, Faculty of Business and Law

Abstract: Today we live in a post-truth and highly digitalized era characterized by the flow of (mis-)information around the world. Identifying the impact of this information on stock markets and, moreover, forecasting stock returns and volatilities has become a much more difficult, and perhaps an almost impossible, task purpose. This paper investigates the impact of macroeconomic factors on the German main stock index, the DAX30, for the time period from 1991 to 2016. There are no comparable investigations for the DAX regarding this time period and the GARCH approach in the literature. Using a dataset about 23 variables and over a timeframe of about 25 years, we find evidence that the growth rates of money supply M1 have a strong impact on the stock returns. The results illustrate that in the post-crisis period more macroeconomic factors have a significant impact on the German stock market compared to the pre-crisis period. This implies that in the post-crisis period a macro-driven market is prevailing. In the post-crisis period, however, increasing saving rates, M2 and M3 lead to shrinking stocks values due to higher risk aversion.

Date: 2018
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fhfwps:13

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