RELATIONS BETWEEN MACROECONOMIC INDICES AND STOCK PRICES IN THE BALTIC COUNTRIES

Paulius Boreika, Donatas Pilinkus

Abstract


Growing economy became an important criterion that assesses the country’s development, its situation in respect of the neighboring countries and the possibilities of equal cooperation in the world of business and politics. Enterprise capacity, its importance to the country‘s economy, the amount of generated financial resources and eventually produced value and profit are reflected in the stock price of the enterprise. Profitable enterprises always have a great stock value potential. There is a direct interrelation of stock prices with macroeconomic indices. In order to determine this interrelation, we invoke a correlation method that demonstrates the strength of this interrelation between the variables. By collecting data from statistical resources, we get various economic indices. Applying correlation these indices are compared with stock prices, which are reflected in OMX index, and so we get the strength of the interrelation. The larger is the obtained value, the stronger is the interrelation between the variables. The country’s economy is reflected by the demand for stocks, i.e. by the value of the enterprises listed in the stock exchange. In this way, by employing the indices and macroeconomic variables, we can compare and assess the level of the country’s health, and on the ground of theoretical and practical aspects we can provide forecasts into the future. Macroeconomic variables are relevant to the dynamic movements of stock prices in the market. The results of correlation method affirm the interrelation outlined in the theoretical underpinnings. The research proved the existence of interrelation between macroeconomic indices and stock prices.


Keywords


stock prices; stock market; macroeconomic indices; the Baltic countries.

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Print ISSN: 1822-6515
Online ISSN: 2029-9338