The The Reaction of the Capital Market to Changes in Macroeconomic Variables: A Case Study of Bosnia and Herzegovina
The Reaction of the Capital Market to Changes in Macroeconomic Variables: A Case Study of Bosnia and Herzegovin
Keywords:
stock market, turnover, export, GDP, panel regression analysis
Abstract
This study aims to identify the impact of macroeconomic and market variables on the stock market in Bosnia and Herzegovina. Two stock market indices on the capital market of Bosnia and Herzegovina are considered, namely the stock market index SASX-30 and BIRS. At the same time, macroeconomic and market variables are turnover (TRN), market capitalization (MC), export (EXP), import (IMP), gross domestic product (GDP), consumer price index (CPI), and foreign direct investment (FDI). The study adopts panel regression analysis for the period from 2013 to 2022. The results of the panel regression analysis showed that export and import values have the strongest influence in terms of significance on the movement of returns on the SASX-30 and BIRS stock market indices on the capital market of Bosnia and Herzegovina. On the other hand, the variables were achieved the lowest significance: turnover, market capitalization, foreign direct investments, and consumer price index.
References
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Celebi, K., & Honig, M. (2019). The Impact of Macroeconomic Factors on the German Stock Market: Evidence for the Crisis, Pre and Post Crisis Periods. International Journal of Financial Studies, Vol. 7(2), pp. 1-13.
Chowdhury, A., Uddin, M., & Anderson, K. (2018). Liquidity and macroeconomic management in emerging markets, Emerg. Markets Rev. Vol. 34, pp. 1–24.
Eita, J.H. (2012). Modeling Macroeconomic Determinants of Stock Market Prices: Evidence From Namibia. Journal of Applied Business Research. Vol. 28(5), pp. 871–884.
Errunza, V., & Hogan, K. (1998). Macroeconomic Determinants of European Stock Market Volatility. European Financial Management, Vol. 4, pp. 361-377.
Flannery, M. J., & Protopapadakis, A. A. (2002). Macroeconomic factors do influence aggregate stock returns. A Review of Financial Studies, Vol. 15(3), pp. 751–782.
Foreign Investment Promotion Agency of Bosnia and Herzegovina (2023). Analysis of direct foreign investments in Bosnia and Herzegovina for 2022 and 2023 with a comparative analysis of BiH and the countries of the region in the reports of international organizations. Retrived from: https://www.fipa.gov.ba/publikacije_materijali/Informacije_i_izvjestaji/default.aspx?id=17157&langTag=bs-BA.
Garcia, V. F., & Liu, L. (1999). Macroeconomic determinants of stock market development. Journal of Applied Economics, Vol. 2, pp. 29–59.
Goh, J. C., & Wang, Y. (2013). Can US economic variables predict the Chinese Stock Market? Pacific-Basin Finance Journal, Vol. 22(1), pp. 69–87.
Huong, P.T.Q. (2018). Macroeconomic factors and corporate capital structure: Evidence from listed joint stock companies in Vietnam, Int. J. Financial Res. Vol. 9, no. 1, pp. 31–40.
Ibrahim, M., &, Musah, A. (2014). An econometric analysis ofthe impact of macroeconomic fundamentals on stockmarket returns in Ghana. Research in Applied Economics, Vol. 6(2), pp. 47–72.
Islam, M.T., & Alam M.J. (2019). The relationship between informal economy and GDP growth: a study on south-asian develop-ping countries. Can. J. Bus. Inf. Stud. Vol. 1(5), pp. 1-9.
Levine, R., & Zervos, S. (1998). Stock markets. Banks and Economic Growth, American Economic Review, Vol. 88, pp. 537–558.
Nisha, N. (2015). Impact of Macroeconomic Variables on Stock Returns: Evidence from Bombay Stock Exchange (BSE). Journal of Investment and Management, Vol. 4(5), pp. 162 -170.
Republic of Srpska Securities Commission (2022). Report on the state of the securities market for 2022. Retrieved from: https://www.secrs.gov.ba/Documents/Izvjestaji/a9ea9f9f-e960-41b4-b51f-f11202082023_sr-Latn-CS.pdf
Salimullah A. (2016). Granger Causality of Interest Rate and Exchange Rate on Stock Volatility at Chicago Options Market, Scientia et Humanitas. A Journal of Student Research, pp. 35-54.
Shah, S.A. (2018). Impact of Macro Level Economic Factors on Capital Markets Returns: Evidence from Emerging Market of Asia. Journal of Hotel & Business Management, Vol. 7(2), pp. 183-188
Singh, V. R. (2014). Capital Market And Its Role In Indian Financial System. International Journal of Advanced Research in Management and Social Sciences, Vol. 3(3), pp. 130–140.
The Central Bank of Bosnia and Herzegovina (2023). Financial stability reports, 2023. Retrieved from: https://www.cbbh.ba/Content/Archive/575.
The Sarajevo Stock Exchange (2022). SASE statistical bulletin for 2022. Retrived from:: https://www.sase.ba/v1/Izvje%C5%A1taji/Ostali-izvje%C5%A1taji/Godi%C5%A1nji-izvje%C5%A1taji
Tirole, J. (1991). Privatization in Eastern Europe: Incentives and the Economics of Transition, In Blanchard, O. J. and Fisher, S. S. (eds) NBER Macroeconomics Annual, (Cambridge, MA: The MIT Press).
Tsaurai K. (2018). What are the determinants of stock market development in emerging markets? Academy of Accounting and Financial Studies Journal, Vol. 22(2), pp. 1-11.
Tursoy, T., & Gunsel, N. , Rjoub, H. (2008). Macroeconomic Factors, the APT and the Istanbul Stock Market, International Research Journal of Finance and Economics, Vol. 22: pp. 49-57.
Yusoff, W.F.W., & Guima, I.J. (2015). Stock market development of Middle East and North Africa (MENA) region. International Journal of Business and Economics Research, Vol. 4(3), pp. 163-171