| Abstract [eng] |
Stock market is a part of economy system and can not exist separately. It was identified by researchers that rather strong relationship exists between stock market development and economic changes. Changes in a stock market can predict changes in economy. Stock market usually decline during the economic crisis and signalizes about the recovery of economy when it starts to grow. According the definition of the effective market, stock prices fully reflect information of economic changes and expectation of the investors. In the first part of this work the theoretical overview on economic and stock market cycle were introduced. What is more, the indicators were identified to forecast economic cycle. In the second part theoretical background of relationship between stock market and economy was discussed. Moreover previous empirical studies were analyzed. The main conclusion of this part is that influence of stock market to economic activity was found while analyzing stock market index and macroeconomic variables. On the other hand, economy influence to stock market was defined while using GDP and market development variables for calculations. This thesis aims to investigate the causal relationship between stock market development and economic activity in Baltic States using Granger – causality test and an autoregressive distributed lag model (ADL). The research is based on quarterly data on the period of 2006–2015. GDP, Nasdaq Baltic stock market index, market capitalization, market turnover, interest rates, consumer price index, exchange rate and production index were selected for the survey. The causality between these subjects were determined and model describing each variable was created using ADL model. On the basis of the Baltic states statistical data, results of the research have revealed, a strong one way relationship between stock market indexes and GDP. One way casuality was also determined for consumer price and stock index, also for production and stock index. Two way casuality was found between interest rates and stock market. |
