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How Inflation, Market Capitalization, Industrial Production and the Economic Sentiment Indicator Affect the EU-12 Stock Markets

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  • Dimitrios Subeniotis
  • Dimitrios Papadopoulos
  • Ioannis Tampakoudis
  • Athina Tampakoudi

Abstract

In the present study we map the relationship between the EU-12 stock market price indices and four crucial macroeconomic factors, using panel data analysis. The examined variables are market capitalization, industrial production, the economic sentiment indicator, and inflation, while the twelve countries are those which have adopted the euro. The empirical results reveal a strong effect of the first three factors, while inflation has a negative but not statistically significant coefficient. Further, the variables that affect the stock markets positively are market capitalization and the economic sentiment indicator. Finally, an applied statistical model confirms the significant convergence of the EU-12 stock markets in the long run, indicating a low geographic diversification across European markets.

Suggested Citation

  • Dimitrios Subeniotis & Dimitrios Papadopoulos & Ioannis Tampakoudis & Athina Tampakoudi, 2011. "How Inflation, Market Capitalization, Industrial Production and the Economic Sentiment Indicator Affect the EU-12 Stock Markets," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 105-120.
    • Handle: RePEc:ers:journl:v:xiv:y:2011:i:1:p:105-120
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    3. Ngoc Bao Vuong & Yoshihisa Suzuki, 2022. "The Moderating Effect of Market-Specific Factors on the Return Predictability of Investor Sentiment," SAGE Open, , vol. 12(3), pages 21582440221, July.
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    More about this item

    Keywords

    Stock Markets; Panel Data; Macroeconomic Fundamentals.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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