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Effects of Macroeconomic Indicators on the Financial Markets Interrelations

Anna Czapkiewicz (), Pawel Jamer and Joanna Landmesser
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Anna Czapkiewicz: Faculty of Management, AGH University of Science and Technology, Poland
Pawel Jamer: Department of Econometrics and Statistics, Warsaw University of Life Sciences, Poland
Joanna Landmesser: Department of Econometrics and Statistics, Warsaw University of Life Sciences, Poland

Czech Journal of Economics and Finance (Finance a uver), 2018, vol. 68, issue 3, 268-293

Abstract: Analyses of financial market interrelationships are important for effective portfolio diversification. The interdependencies between markets are stronger during turbulent times on financial markets than during periods of calm. This fact was especially evident during the global crisis. So, the predictability of stock return interrelationships is a topic discussed most-frequently in empirical studies. In this paper, the role of macroeconomics indicators in the dynamic of interrelationships between financial markets will be considered. Effects of the unemployment rate, CPI, long-term interest rate, and industrial production on the comovement between markets from the G6 group will be verified. For this purpose, the Markov-switching copula model with time-varying matrix transition probability (TVPMS) will be adapted. It has been found that the unemployment rate and long-term interest rate are important factors for interrelationships between the Polish market and the developed market from Germany, France or Italy. The long-term interest rate appears to be important for interrelationships between the Poland and British market and between some developed markets.

Keywords: interrelations; macroeconomic indicators; G6; financial markets; TVTMP model (search for similar items in EconPapers)
JEL-codes: C52 G11 G15 G32 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:fau:fauart:v:68:y:2018:i:3:p:268-293