Stock exchange development in V4 countries

Abstract

PURPOSE: The paper presents an investigation of the stock market development in Visegrad Group countries with the use of selected determinants.

DESIGN/METHODOLOGY/APPROACH: The methodology is based on an estimation of panel data. The econometric model of Weighted Least Squares (WLS) is implemented in order to estimate structural parameters. Stock market capitalization to GDP is chosen as the dependent variable. The set of independent variables consists of, liquid liabilities to GDP, domestic credit to private sector (% of GDP), stock market total value traded to GDP, the number of listed companies per 1,000,000 people, GDP per capita (constant 2015 USD) and stock price volatility. The timeframe of the study is from 1993 to 2020.

FINDINGS: The major factors that contribute to stock market development in Visegrad Group countries include stock market total value traded to GDP, the number of listed companies per 1,000,000 people and GDP per capita (constant 2015 USD). Not all of the determinants have a statistically significant impact on the stock market development. Economic growth, stock market liquidity, and the number of listed firms per 1 000 000 people have a maximum influence on the stock market development. Economic growth, stock market liquidity, and the number of listed firms per 1 000 000 people have a positive and statistically significant impact on the stock market development. It seems to be in accordance with theory and other studies.

PRACTICAL IMPLICATIONS: The results of the estimation can be useful for students, practitioners, and policy makers. They can be the basis for further research and discussion.

ORIGINALITY/VALUE: The paper attempts to determine whether selected factors affect the development of stock exchanges in the given countries in a significant way. It provides new evidence based on both the actual dataset and the factors under analysis.