International influences on Irish stock returns

Donal Bredin and Stuart Hyde

Centre for Financial Markets Working Papers from Research Repository, University College Dublin

Abstract: We examine the influence of US and UK macroeconomic and financial variables on Irish stock returns in a nonlinear framework. We allow for time variation via regime switching using a smooth transition regression (STR) model. Importantly we find that both US and UK stock returns are significant determinants of Irish returns. Further,US returns are an important transition variable. Additionally,we show that both the US industrial production growth and changesin short term interest rates play an important role in explaining Irish stock returns. A two transition variable model finds that US short term interest rate changes exert a secondary nonlinear influence on Irish returns. The significance of US variables is reflective of the influence of US investment in the Irish economy.

Keywords: Smooth transition; Regime switching; Stock exchanges--Ireland; Macroeconomics; Ireland--Foreign economic relations (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2004-03
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Persistent link: https://EconPapers.repec.org/RePEc:rru:cfmwps:10197/1164

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