Economic variables and stock market returns: evidence from the Athens stock exchange

Theophano Patra and Sunil Poshakwale

Applied Financial Economics, 2006, vol. 16, issue 13, 993-1005

Abstract: This research examines the short run dynamic adjustments and the long run equilibrium relationships between selected macroeconomic variables, trading volume and stock returns in the emerging Greek stock market during the period 1990 to 1999. Empirical results show that short run and long run equilibrium relationship exists between inflation, money supply and trading volume and the stock prices in the Athens stock exchange. No short run or long run equilibrium relationship is found between the exchange rates and stock prices. The results of this research are consistent with the theoretical arguments and practical developments that occurred in the Greek stock markets during the sample period. The results also imply that the ASE is informationally inefficient because publicly available information on macroeconomic variables and trading volumes can be potentially used in predicting stock prices.

Date: 2006
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DOI: 10.1080/09603100500426523

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