THE EFFECTS OF MACROECONOMIC PROCESSES ON THE STOCK MARKET

Abstract

The economy of Lithuania, which in the last five years has been one of the fastest growing economies in the European Union, in 2008 has slowed down due to unfavourable tendencies. The position of Lithuania has not been exceptional, on the contrary it proved the rule that has been present in the countries’ economies over the last decade. When evaluating Lithuania’s economic perspective and counting on the Eurostat forecasts, together with the opinion of the most of Lithuanian analysts, the growth of the economy in Lithuania should stop in 2009, and recession is forecasted in 10 EU countries. The stock market is closely related to the economy of the country, for that reason their growth has a mutual relationship because when the economic situation is getting better the stock market is becoming more active as well, and on the other hand when the stock market is developing it has a positive effect on the growth of the economy.

Statistical measures that can reproduce the state of the stock market and the tendencies of its change dynamics are the stock indexes. Having in mind the more complicated state of the finance system it is important to answer the question of what impacts the fluctuations of the stock prices.

The article discusses various factors that impact the fluctuations of the Lithuanian stock indexes; also stock index factor analysis is performed. Factors are determined using the main components method.