Acta Univ. Agric. Silvic. Mendelianae Brun. 2018, 66(6), 1613-1626 | DOI: 10.11118/actaun201866061613

The Effect of Economic Factors on Performance of the Stock Market in the Czech Republic

Tomáš Pražák
Department of Finance and Accounting, School of Business Administration, Silesian University, Univerzitní nám. 1934/3, 733 40 Karviná, Czech Republic

History has shown that the stock prices and other financial assets are important aspects of the dynamics of economic activity. Stock prices can be an indicator of social mood and are used as a leading factor in the economic activity and financial stability. This paper investigates the relationship between selected macroeconomic and microeconomic factors and stock prices of companies listed on the Prague Stock Exchange. The portfolio theory and Capital Asset Pricing Model for specification of stock market are used. Johansen and Juselius (1990) and Hansen (1982) approaches are applied to test for causal relationship. In addition, the Vector error correction model for equilibration of a potential long-run relationship between variables is used. Selected macroeconomic and microeconomic factors provide a statistically significant relationship on stock prices during the observed period from 2006 to 2016. However, the results differ substantially among the sectors of economic activity, the industrial production, the gros domestic product and profitability ratios in particular, can explain a long-run behavior of stock prices.

Keywords: stock prices, macroeconomic factors, microeconomic factors, cointegration, CAPM
Grants and funding:

Publication of this paper was supported by the Student Grant System of Silesian University in Opava within the project "The effect of fundamental factors and corporate governance on stock prices". The support is greatly acknowledged.

Published: December 19, 2018  Show citation

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Pražák, T. (2018). The Effect of Economic Factors on Performance of the Stock Market in the Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 66(6), 1613-1626. doi: 10.11118/actaun201866061613
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