Title: Macroeconomic factors' influence on 'new' European countries' stock returns: the case of four transition economies

Authors: Aristeidis G. Samitas, Dimitris F. Kenourgios

Addresses: Business School, Department of Business Administration, University of the Aegean, 6 Christou Lada Str., Office 15, 10561 Athens, Greece. ' Faculty of Economics, University of Athens, 5 Stadiou Street, Office 115, 10562 Athens, Greece

Abstract: This paper investigates whether current and future domestic and international macroeconomic variables can explain long and short run stock returns in four |new| European countries (Poland, Czech Republic, Slovakia and Hungary). |Old| western European countries (UK, France, Italy and Germany) are included in the empirical analysis, whilst USA is considered as a |foreign global influence|. Using the present value model of stock prices and a complete range of cointegration and causality tests, it is found that |new| European stock markets are not perfectly integrated with foreign financial markets, while domestic economic activity and the German factor are more influential on these stock markets than the American global factor.

Keywords: stock returns; macroeconomic factors; transition economies; European Union; present value model; stock markets; south-eastern Europe; USA; cointegration tests; causality tests; long-run structural modelling; error-correction model; financial services.

DOI: 10.1504/IJFSM.2007.011670

International Journal of Financial Services Management, 2007 Vol.2 No.1/2, pp.34 - 49

Published online: 14 Dec 2006 *

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