Change search
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf
The stock market and government debt: the impact of government debt changes on the stock market
Jönköping University, Jönköping International Business School.
2012 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This thesis investigates whether or not changes in a country’s government debt could affect its domestic stock market performance. The relationship is investigated by examining three different European countries, Germany, Portugal and Sweden, on the basis of two variables; (1) quarterly government debt changes as a percentage of gross domestic product and (2) the quarterly stock market changes over the time period2000:Q2 – 2011:Q2. The evidence is presented with help of Ordinary Least Square Method and Granger Causality test for each respective country. According to the Efficient Market Hypothesis, stock market prices should fully reflect all relevant information, e.g. government debt changes, as soon as they occur, without any delay, if the market is efficient. Past information should be insignificant and therefore not affect the stock market prices in an efficient market. In the cases of Sweden and Germany, the results proved to be ambiguous and thus do not allow for either rejection or acceptance of the Efficient Market Hypothesis with respect to government debt changes. However, some support was found in the case of Germany since the government debt changes and the stock market performance were instantaneously correlated. The empirical results presented in this thesis further allowed for the assumption that Portugal was not able to efficiently capture changes in the debt levels without any delay. This indicates that the Efficient Market Hypothesis can be rejected in regards for Portugal with respect to government debt changes. Furthermore, since the Portuguese stock market performance was not able to capture efficiently changes in the government debt level, it hence could possibly mislead the direction of the economy when looking into the stock prices to determine economic conditions. Moreover, the results imply that each country faces different relationships between the variables and that the relationships possibly could depend on the economic health of a country.

Place, publisher, year, edition, pages
2012.
Keyword [en]
Stock Market, Government Debt, Granger Causality Test and Efficient Market Hypothesis
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-19323OAI: oai:DiVA.org:hj-19323DiVA: diva2:548814
Uppsok
Social and Behavioural Science, Law
Supervisors
Examiners
Available from: 2012-09-03 Created: 2012-09-01 Last updated: 2012-09-03Bibliographically approved

Open Access in DiVA

fulltext(1264 kB)648 downloads
File information
File name FULLTEXT01.pdfFile size 1264 kBChecksum SHA-512
0472764aba510b032831e483bc4463fe4bcaf0cb8f2a69ee7285377c49875923181ae95293c4137328a4517aae08c0b992ecd2c2524fd52dd98aae5d23ecb1e0
Type fulltextMimetype application/pdf

By organisation
Jönköping International Business School
Economics

Search outside of DiVA

GoogleGoogle Scholar
Total: 648 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 343 hits
CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf