Stock Indices and Their Role in Prediction Czech and Slovak Business Cycle
Stock Indices and Their Role in Prediction Czech and Slovak Business Cycle

Summary/Abstract: The paper demonstrates the importance of stock indices in predicting the development of the Czech and Slovak business cycles. At present, there are several international and national institutions which deal with the analysis of how the selected economic indicators influence the development and prediction of a business cycle, mainly through a construction of composite leading indicators, which are often used for short-term prediction of business cycles. All these institutions also examine the abilities of stock indices to predict the development of an economy, their findings, however, differ. International institutions, such as Eurostat and OECD, considers stock indices important, whereas at national levels the situation is different. We aim to analyse the real predictive abilities of stock indices in relation to the Czech and Slovak business cycles using our own methodology and to present conclusions of our analysis, i.e. whether it is really appropriate to use stock indices in predicting business cycles for these two countries.

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