THE RELATIONSHIP BETWEEN THE CHANGE IN LONG-TERM INTEREST RATES AND THE PROFITABILITY OF THE ROMANIAN STOCK MARKET BETWEEN 2020 -2023

Apostol Luiza Madalina
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Apostol Luiza Madalina: THE NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY POLITEHNICA BUCHAREST, PITEȘTI UNIVERSITY CENTRE, ROMANIA

Annals - Economy Series, 2024, vol. 2, 82-89

Abstract: This paper examines the connection between the change in 10-year government bond yields, as a proxy of the long-term interest rates and the stock returns for Romania, between April 2020 and December 2023. The stock prices were represented by the reference index BET (Bucharest Exchange Trading) of the Romanian stock market, Bucharest Stock Exchange (BSE). The regression analysis showed an inverse linear connection, of medium intensity, between the exogenous variable, the change in government bond yields, and the dependent variable, the stock returns listed by BSE. The increase in interest rates will lead to a decrease in the price of the companies' stocks, the increase in the cost of financing for companies will decrease the value of their investments, and therefore the investors will anticipate the decrease in future cash flows. On the other hand, the lower interest rates will appreciate the companies’ market value, because the investors anticipate the increase of corporate investments.

Keywords: government bond yields; stock returns; linear regression (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:cbu:jrnlec:y:2024:v:2:p:82-89

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