The Application of Sovereign Bond Spreads and the Development
of the Stock Market on GDP Prediction: The Case of Visegrad
Group

D 2017

The Application of Sovereign Bond Spreads and the Development of the Stock Market on GDP Prediction: The Case of Visegrad Group

HVOZDENSKÁ, Jana

Basic information

Original name

The Application of Sovereign Bond Spreads and the Development of the Stock Market on GDP Prediction: The Case of Visegrad Group

Authors

HVOZDENSKÁ, Jana (203 Czech Republic, guarantor, belonging to the institution)

Edition

Part 1. Brno, European Financial Systems 2017. Proceedings of the 14th International Scientific Conference, p. 274-280, 7 pp. 2017

Publisher

Masaryk University

Other information

Language

English

Type of outcome

Proceedings paper

Field of Study

50600 5.6 Political science

Country of publisher

Czech Republic

Confidentiality degree

is not subject to a state or trade secret

Publication form

printed version "print"

References:

URL

RIV identification code

RIV/00216224:14560/17:00098197

Organization unit

Faculty of Economics and Administration

ISBN

978-80-210-8609-8

UT WoS

000418110700034

Keywords in English

bonds; slope; spread; yield curve

Abstract

In the original language

The yield curve – specifically the spread between the long term and the short term interest rates is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions one to six quarters ahead. A rise in the short rate tends to flatten the yield curve as well as to slow down real growth the near term. The relationship between the spread and future GDP activity was proved already before. For better predictions it is good to use other overtaking indicators of economic activity as the development of the stock market. This paper aims to analyze the dependence between the slope of the yield curve, development of the stock market and an economic activity of selected countries between the years 2000 and 2016. The selected countries are the Czech Republic, Hungary, Poland and Slovakia. The natural and probably the most popular measure of economic growth is GDP growth, taken quarterly. We have found out that the bond spreads and stock market development might be used for predicting of the future economic activity, the best lags of bond spreads are 2, 4 or 5 quarters. These findings might be beneficial for investors and provide further evidence of the potential usefulness of the yield curve spreads as indicators of the future economic activity.

Links

MUNI/A/1039/2016, interní kód MU

Name: Modelování volatility na finančních trzích a její aplikace v oblasti řízení rizik a oceňování aktiv (Acronym: VOLATILITA)

Investor: Masaryk University, Category A

Cite

HVOZDENSKÁ, Jana. The Application of Sovereign Bond Spreads and the Development of the Stock Market on GDP Prediction: The Case of Visegrad Group. In European Financial Systems 2017. Proceedings of the 14th International Scientific Conference. Part 1. Brno: Masaryk University, 2017, p. 274-280. ISBN 978-80-210-8609-8.

@inproceedings{1394967,
   author = {Hvozdenská, Jana},
   address = {Brno},
   booktitle = {European Financial Systems 2017. Proceedings of the 14th International Scientific Conference},
   edition = {Part 1},
   keywords = {bonds; slope; spread; yield curve},
   howpublished = {tištěná verze "print"},
   language = {eng},
   location = {Brno},
   isbn = {978-80-210-8609-8},
   pages = {274-280},
   publisher = {Masaryk University},
   title = {The Application of Sovereign Bond Spreads and the Development of the Stock Market on GDP Prediction: The Case of Visegrad Group},
   url = {https://is.muni.cz/do/econ/sborniky/70896034/},
   year = {2017}
}

TY  - CONF
ID  - 1394967
AU  - Hvozdenská, Jana
PY  - 2017
TI  - The Application of Sovereign Bond Spreads and the Development of the Stock Market on GDP Prediction: The Case of Visegrad Group
PB  - Masaryk University
CY  - Brno
SN  - 9788021086098
KW  - bonds
KW  - slope
KW  - spread
KW  - yield curve
UR  - https://is.muni.cz/do/econ/sborniky/70896034/
N2  - The yield curve – specifically the spread between the long term and the short term interest rates is a valuable forecasting tool. It is simple to use and significantly outperforms other financial and macroeconomic indicators in predicting recessions one to six quarters ahead. A rise in the short rate tends to flatten the yield curve as well as to slow down real growth the near term. The relationship between the spread and future GDP activity was proved already before. For better predictions it is good to use other overtaking indicators of economic activity as the development of the stock market. This paper aims to analyze the dependence between the slope of the yield curve, development of the stock market and an economic activity of selected countries between the years 2000 and 2016. The selected countries are the Czech Republic, Hungary, Poland and Slovakia. The natural and probably the most popular measure of economic growth is GDP growth, taken quarterly. We have found out that the bond spreads and stock market development might be used for predicting of the future economic activity, the best lags of bond spreads are 2, 4 or 5 quarters. These findings might be beneficial for investors and provide further evidence of the potential usefulness of the yield curve spreads as indicators of the future economic activity.
ER  -

HVOZDENSKÁ, Jana. The Application of Sovereign Bond Spreads and the Development of the Stock Market on GDP Prediction: The Case of Visegrad Group. In \textit{European Financial Systems 2017. Proceedings of the 14th International Scientific Conference}. Part 1. Brno: Masaryk University, 2017, p.~274-280. ISBN~978-80-210-8609-8.

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