MACROECONOMIC DETERMINANTS OF STOCK PRICES, EVIDENCE FROM CROATIA

This paper aims to explore dependence between macroeconomic indicators of the Croatian economy and stock prices on the Zagreb Stock Exchange. Panel data and Least Squares Dummy Variable Corrected estimator (LSDVc) was used for that purpose. In the previous studies on this topic, an LSDVc estimator was not used, but other estimators where employed for static panel models (fixed-effect estimator and pooled OLS estimator) and dynamic panel models (Arellano-Bond estimator and Blundell-Bond estimator). Therefore, the use of LSDVc estimator is the major contribution of this paper. The results of the estimated dynamic panel models showed that stock prices from the previous quarter, the index of industrial production, real GDP, inflation and interest rates have a statistically significant and positive impact on stock prices on the Croatian capital market. On the other hand, consumer confidence index, Economic sentiment indicator, house price index, household net savings and general government debt have a negative impact on stock prices.