Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries

This study tests the weak form of the efficient capital markets theorem in five transition economies in Southeast Europe between 2005 and 2016. A panel pooled mean group estimator is used to examine the relationship between macroeconomic indicators...

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Main Author:	Dodig, Ante
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2020
Subjects:	CAPITAL MARKETS EMERGING MARKET ECONOMIES MARKET EFFICIENCY MACROECONOMIC INDICATOR TRANSITION ECONOMIES TRANSPARENCY
Online Access:	http://documents.worldbank.org/curated/en/973421594990591465/Relationship-between-Macroeconomic-Indicators-and-Capital-Markets-Performance-in-Selected-Southeastern-European-Countries http://hdl.handle.net/10986/34169

id	okr-10986-34169
recordtype	oai_dc
spelling	okr-10986-341692022-09-20T00:12:13Z Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries Dodig, Ante CAPITAL MARKETS EMERGING MARKET ECONOMIES MARKET EFFICIENCY MACROECONOMIC INDICATOR TRANSITION ECONOMIES TRANSPARENCY This study tests the weak form of the efficient capital markets theorem in five transition economies in Southeast Europe between 2005 and 2016. A panel pooled mean group estimator is used to examine the relationship between macroeconomic indicators and the performance of stock market indexes. This is a suitable estimator for these young frontier markets, given that they have yet to develop the breadth and depth of an advanced market—such as ample liquidity and traders—to aggregate cross-country data and use level series prime data instead of differentials of the same. These frontier capital markets are found to be weak form inefficient, meaning that stock prices do not reflect available current public information. In other words, when a market is transparent and investor behavior is rational, the macroeconomic data should be included in the value of the stock indexes. The five countries may benefit from bringing their capital markets legislation in line with those of developed countries and by improving corporate governance and transparency. This would boost investor trust and liquidity. The coverage of this research can be extended to find more standardized data values and develop additional factors not captured by this model. 2020-07-23T13:20:45Z 2020-07-23T13:20:45Z 2020-07 Working Paper http://documents.worldbank.org/curated/en/973421594990591465/Relationship-between-Macroeconomic-Indicators-and-Capital-Markets-Performance-in-Selected-Southeastern-European-Countries http://hdl.handle.net/10986/34169 English Policy Research Working Paper;No. 9323 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Europe and Central Asia Eastern Europe
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	CAPITAL MARKETS EMERGING MARKET ECONOMIES MARKET EFFICIENCY MACROECONOMIC INDICATOR TRANSITION ECONOMIES TRANSPARENCY
spellingShingle	CAPITAL MARKETS EMERGING MARKET ECONOMIES MARKET EFFICIENCY MACROECONOMIC INDICATOR TRANSITION ECONOMIES TRANSPARENCY Dodig, Ante Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries
geographic_facet	Europe and Central Asia Eastern Europe
relation	Policy Research Working Paper;No. 9323
description	This study tests the weak form of the efficient capital markets theorem in five transition economies in Southeast Europe between 2005 and 2016. A panel pooled mean group estimator is used to examine the relationship between macroeconomic indicators and the performance of stock market indexes. This is a suitable estimator for these young frontier markets, given that they have yet to develop the breadth and depth of an advanced market—such as ample liquidity and traders—to aggregate cross-country data and use level series prime data instead of differentials of the same. These frontier capital markets are found to be weak form inefficient, meaning that stock prices do not reflect available current public information. In other words, when a market is transparent and investor behavior is rational, the macroeconomic data should be included in the value of the stock indexes. The five countries may benefit from bringing their capital markets legislation in line with those of developed countries and by improving corporate governance and transparency. This would boost investor trust and liquidity. The coverage of this research can be extended to find more standardized data values and develop additional factors not captured by this model.
format	Working Paper
author	Dodig, Ante
author_facet	Dodig, Ante
author_sort	Dodig, Ante
title	Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries
title_short	Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries
title_full	Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries
title_fullStr	Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries
title_full_unstemmed	Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries
title_sort	relationship between macroeconomic indicators and capital markets performance in selected southeastern european countries
publisher	World Bank, Washington, DC
publishDate	2020
url	http://documents.worldbank.org/curated/en/973421594990591465/Relationship-between-Macroeconomic-Indicators-and-Capital-Markets-Performance-in-Selected-Southeastern-European-Countries http://hdl.handle.net/10986/34169
_version_	1764480387183017984

Relationship between Macroeconomic Indicators and Capital Markets Performance in Selected Southeastern European Countries

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