Mutual Correlation and Interaction on Capital Markets in Countries of Development, Certain EU Member Countries and Development Countries: Evidence of Federation of Bosnia and Herzegovina

  • Almir Alihodžić


The capital market represents a significant segment of the financial system because it directs free financial resources and has a substantial impact on the development of the company, the economy on the one hand, and on the other hand it affects attracting domestic and foreign investors. The capital market in the Federation of Bosnia and Herzegovina belongs to a group of developing markets, characterized by small market capitalization and liquidity on the one hand, while on the other hand, this market is characterized by relative openness, greater political instability and less connection with developed markets. The primary goal of this research is to determine the degree of relationship and openness of the capital market in the Federation of Bosnia and Herzegovina with the capital markets of the EU countries and developed countries. The results of the Pearson correlation test showed that the most substantial connection with the capital market in the Federation of B&H was recorded with the capital markets in Austria (stock exchange index: ATX5), Hungary SE (stock exchange index: Budapest SE), France (stock exchange index: CAC40), Italy (stock exchange index: FTSEMIB), Turkey (stock exchange index: BIST All share) and USA (stock exchange index: S&P 500). The weakest correlation was recorded with the capital markets of Slovenia, Croatia, and the United Kingdom. Also in this paper will be carried out the Granger causality test with the help of the software package SPSS 16.0. The primary goal of the Granger test is to determine which prices can affect the prices of the capital market in the Federation of B&H and whether the prices on the capital market in B&H can affect prices in other markets. The survey covers the period from January 5, 2015, to December 29, 2017. Data are collected on a daily basis from the stock market of the observed markets.


Stock exchange index Causality test Liquidity 

JEL classification

G1 G12 G17 


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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Almir Alihodžić
    • 1
  1. 1.University of ZenicaZenicaBosnia and Herzegovina

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