STOCK MARKET PRICE INDICES MODELLING BY A SMALL SCALE BAYESIAN VAR: THE CASE OF BRITISH FTSE AND GERMAN DAX INDEX

• Authors: Bikár Miloš , Hodula Martin
• Languages of publication: EN

Abstracts

EN

This article examines the behaviour and responses of stock market indices to various macroeconomic determinants by using small scale Bayesian VAR model. Our objective is to investigate the extent to which various macroeconomic shocks contribute to changes in stock market conditions. We focus on the German DAX 30 index and British FTSE 100 indices which serve as indicators for the development of the German and British economy as well as an illustration to evaluate the performance of the model. We have confirmed the general view that BVAR model outperforms a standard VAR model when the forecasting accuracy improved from 5% to 12%. We have also confirmed that any increase in risk-premium negatively influences stock markets in both case studies. However, the structure of the economies and capital also makes a difference, as found from different market reactions to supply shock.

Keywords

EN

BAYESIAN VAR; FORECASTING; STOCK MARKET; GERMAN DAX INDEX

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2016
• Volume: 64
• Issue: 8
• Pages: 737 – 750

Contributors

author

Bikár Miloš

• University of Economics in Bratislava, Faculty of Business Management, Department of Business Finance, Dolnozemská cesta 1/b, 852 35 Bratislava, Slovak Republic

author

Hodula Martin