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An examination of the relationship between key macro-economic variables and the ISEQ index (1986-2017)

Blackwell, Kevin (2017) An examination of the relationship between key macro-economic variables and the ISEQ index (1986-2017). Masters thesis, Dublin, National College of Ireland.

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Abstract

This study examines the relationships between domestic interest rate, domestic inflation and the ISEQ index over the period of 1986 – 2017.

This study investigates the influence of domestic monetary policy and the existence of either the Fisher hypothesis or the proxy hypothesis in the context of the Irish economy.

This examination is carried out using a vector auto-regressive model with two period lagging.

Over the long run and for many of the short run models a negative causal relationship was observed between the domestic rate of inflation and returns of the ISEQ index.

This evidence is consistent with that of the proxy hypothesis which states that inflation and asset prices are negatively linked.

Long run results when examining domestic interest rates exhibited weak relationships with returns of the ISEQ index; with international interest rates such as LIBOR and the Federal funds rate exerting larger influence over asset prices.

This relationship was observed to change over several short run periods studied. The observed results were in line with expectations framed by the literature review

Examination of several other factors introduced many other dimensions; notable of these is the consistent and significant positive causal relationship between the FTSE100 and the ISEQ index. This relationship was consistent not only in the long run model but also throughout all the short run period examinations.

This research attempts to fill a knowledge gap in current Irish literature.

Currently there exists little literature that examines the driving factors of returns of the ISEQ index.
Of the literature in existence much of it is outdated given the events of the financial crisis of the past decade; other research is of limited scope and does not competently answer the questions posed by this research piece.

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HG Finance > Financial Management
H Social Sciences > HG Finance > Investment > Stock Exchange > Irish Stock Exchange
Divisions: School of Business > Master of Science in Finance
Depositing User: CAOIMHE NI MHAICIN
Date Deposited: 22 Nov 2017 09:56
Last Modified: 22 Nov 2017 09:56
URI: http://trap.ncirl.ie/id/eprint/2886

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