Work detail

The Impact of Short-term Interest Rate on Stock Prices in the Czech Republic

Author: Mgr. Štefan Michlian
Year: 2014 - summer
Leaders:
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 81
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance.
Link: https://is.cuni.cz/webapps/zzp/detail/138180/
Abstract: This thesis focuses on the relationship between short
- term interest rate and stock prices. The main idea is that if interest - rate increases, it makes holding stocks less attractive relative to fixed income securities
. Therefore, investors change the structure of their
portfolios and switch capital from stocks to banks, which results in stock prices decrease. In our thesis, we
apply GJR - GARCH - t- M model to study the impact of
Czech interest rate ( 14-day PRIBOR) on the Prague Stock Exchange ( the PX index). In contrast to the
majority of research on this topic, we have found
no impact of the PRIBOR rate on the PX index - neither
on its mean nor on its volatility. We attribute the absence of a significant relationship to exceptional
composition of the PX index. Furthermore, we
have found that the recent crisis has significantly changed the behavior of the Czech stock market

Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance