How Inflation, Market Capitalization, Industrial Production and the Economic Sentiment Indicator Affect the EU-12 Stock Markets
Ioannis Tampakoudis and
European Research Studies Journal, 2011, vol. XIV, issue 1, 105-120
In the present study we map the relationship between the EU-12 stock market price indices and four crucial macroeconomic factors, using panel data analysis. The examined variables are market capitalization, industrial production, the economic sentiment indicator, and inflation, while the twelve countries are those which have adopted the euro. The empirical results reveal a strong effect of the first three factors, while inflation has a negative but not statistically significant coefficient. Further, the variables that affect the stock markets positively are market capitalization and the economic sentiment indicator. Finally, an applied statistical model confirms the significant convergence of the EU-12 stock markets in the long run, indicating a low geographic diversification across European markets.
Keywords: Stock Markets; Panel Data; Macroeconomic Fundamentals. (search for similar items in EconPapers)
JEL-codes: C23 E44 G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ers:journl:v:xiv:y:2011:i:1:p:105-120
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