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The reaction of the WIG stock market index to changes in the interest rates on bank deposits

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  • Grzegorz Przekota
  • Anna Szczepańska-Przekota

Abstract

Determination of the relationship between the money market and capital market is particularly important from the point of view of taking a decision on the location of investment capital. It may help to forecast future states. This study seeks to determine the relationship of the interest rate on deposits in zloty with the WIG stock index and the volume of turnover on the Warsaw Stock Exchange. Analysis of correlation and VAR models are used. Analysis of long-term correlation indicates a negative relationship between the interest rate on deposits in banks and the value of the WIG stock-index. However, this may be spurious. The dependence between these variables may be more complex and should rather be seen as short term. It seems that in general the impact of an increase in interest rates on the value of the WIG index is negative in the short term, just as in the long term. In addition, in the short term these variables can move in the same direction. The results obtained in the research are consistent with results obtained for other national markets. This applies in particular to the relatively weak, negative correlation described above.

Suggested Citation

  • Grzegorz Przekota & Anna Szczepańska-Przekota, 2010. "The reaction of the WIG stock market index to changes in the interest rates on bank deposits," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 20(1), pages 97-110.
    • Handle: RePEc:wut:journl:v:1:y:2010:p:97-110
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    References listed on IDEAS

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