engleski

The Impact of Macroeconomic Variables on Croatian Stock Market

The goal of this paper is to investigate relationships between macroeconomic variables and stock market returns in Croatia. The impact of macroeconomic variables on Croatian stock market is analysed through the impact of domestic and international macroeconomic variables in the short and the long run. The long run relationship is based on the present value model (PVM) which links stock prices and the future discount rate of expected cash flows. PVM should tell us if stock markets are leading indicators of economic activity. The USA is selected as an international factor of global influence and Germany is selected as an international factor of local (European) influence. Germany is one of Croatia’ s main trading partners, too. Using cointegration and causality techniques it is proved that domestic economic activity, measured through industrial production, has significant influence on Croatian stock market and that the international economic activity does not have a significant influence in the long run.

stock market; macroeconomic variables; presents value model; cointegration

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