The fear of equity : the macroeconomics of European aversion towards stock markets

Abstract

The aim of this dissertation is to analyse and evaluate the impact of macroeconomic indicators on stock market participation in the European Union (EU). This dissertation implements the methods of panel regression analysis to achieve the aim and assess the statistical significance of the determinants of stock market participation. Five European countries from 1991 to 2009 have been chosen to represent the European stock markets. In the course of the research, it has been found that the stock market participation in Europe is positive affected by the real gross domestic product per capita and inflation. However, the results of testing also revealed that interest rates, unemployment rates and savings rates had a negative effect on the stock market participation. The results are limited in their power to make generalisation on the whole European Union since an assumption of homogeneity of stock markets was made and less than a fifth of the countries that comprise the EU have been analysed. Recommendations are provided to expand the sample and to conduct a comparative study that will include non-European countries as well.