British Food Journal

Macroeconomic factors and stock prices in the food and drink industry
Jana Šimáková, Daniel Stavárek, Tomáš Pražák, Marie Ligocká,
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To cite this document:
Jana Šimáková, Daniel Stavárek, Tomáš Pražák, Marie Ligocká, (2019) "Macroeconomic factors and
stock prices in the food and drink industry", British Food Journal, Vol. 121 Issue: 7, pp.1627-1641,
https://doi.org/10.1108/BFJ-12-2018-0839
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Macroeconomic
Macroeconomic factors and factors and
stock prices in the food and stock prices

drink industry
Jana Šimáková, Daniel Stavárek, Tomáš Pražák and Marie Ligocká 1627
Department of Finance and Accounting,
Received 31 December 2018
School of Business Administration in Karviná, Revised 6 March 2019
Silesian University in Opava, Opava, Czech Republic Accepted 7 May 2019

Abstract
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Purpose – The purpose of this paper is to estimate and evaluate the impact of macroeconomic fundamentals
on stock prices of selected food and drink industry stocks during the period of 2005–2015, which saw the
global financial crisis and its aftermath.
Design/methodology/approach – The paper employed correlation analysis and the Johansen
cointegration test with the vector error correction mechanism for EU companies operating in the food and
drink industry. The paper tested the effects of GDP, inflation and interest rates (IR) on the stock prices of
companies from Austria, Croatia, Cyprus, Denmark, Finland, Germany, Ireland, Italy, Lithuania, Poland,
Spain and the UK.
Findings – Based on the results, the authors can see that GDP has a generally positive effect on stock price
development. In contrast, the relationship between stock prices and inflation and IR is negative in most cases.
Originality/value – Despite the fact that a majority of empirical research on companies in the food and
drink sector was performed using the microeconomic approach, this paper used the macroeconomic approach
and clearly demonstrated the effects of selected macro-variables on stock prices in selected EU markets.
Macroeconomic factors shape the company’s performance and could potentially lead to persistent changes in
supply and demand conditions in food and drink markets.
Keywords Food industry, Drink industry, Macroeconomic fundamentals, Stock prices
Paper type Research paper

Introduction
The food and drink industry (hereafter FD) is one of the traditional sectors essential to each
economy. Economists usually consider it a stable industry that is more resistant to economic
cycles and fluctuations than other sectors. Correspondingly, stocks of FD companies are
widely selected in investment and portfolio diversifications. They are particularly attractive
for defensive investment strategies and often get a reputation as safe-haven investments
during a crisis or turbulent times for the stock markets.
The FD industry is a major contributor to an economy. In the EU, it is ahead of other
manufacturing sectors, such as the automotive industry. In 2015, the FD sector in the EU
generated a turnover of 1,115bn euro and a value added of 230bn euro, which represented
15.2 per cent of the total turnover in manufacturing and 2.1 per cent of the EU gross value
added. Compared to other manufacturing sectors, the EU FD industry is a key job
provider with 4.51m employees in 2015, representing 15 per cent of the whole labour force
in the EU manufacturing industry. The exports of the FD industry in the EU have been
increasing since 2009 and have reached EUR 110bn in 2017, while imports amounted to
EUR 75bn. More than 25 per cent of the exports were sold to non-EU countries, while the
rate of the extra-EU exports exceeded the rate of growth of the intra-EU exports in recent
years. All the aforementioned statistical information are sourced from the study of
Fooddrink Europe (2018). British Food Journal
Vol. 121 No. 7, 2019
pp. 1627-1641
Publication of this paper was supported by the Student Grant System of Silesian University © Emerald Publishing Limited
0007-070X
(Project SGS/23/2016). The support is gratefully acknowledged. DOI 10.1108/BFJ-12-2018-0839
 BFJ A more in-depth analysis of macroeconomic fundamentals in the FD industry reveals a
121,7 couple of findings illustrating the distinctive characteristics of the FD industry. The
Eurostat data show that the share of production in the FD industry in the GDP has
decreased in almost all of the EU member states since 2005. However, due to the
counter-cyclical character of the industry, this indicator usually rises in periods of economic
slowdown or recession (e.g. years 2008 and 2009) and decreases along with economic boom.
1628 The importance of the FD industry is evident in the share of FD exports in total exports.
Almost all of the EU member states show an increase in this indicator between 2005 and
2016. By inspecting the year-on-year changes in the share, we can see that the largest
changes occurred in 2008–2010, i.e., the years when the economies faced a financial crisis
and an economic slowdown.
The specific characteristics of the FD industry are also reflected in stock markets. Shares
of FD enterprises are a classical example of defensive stocks. Regardless of the state of the
market, consumers are still going to purchase food and drink. Therefore, companies
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operating in the FD sector will typically retain their value during times of uncertainty, as
investors increase their demand for these shares when allocating their investments in
safe-haven assets. Historical values of the sectoral indices reported by “STOXX 600 Europe”
clearly show that stocks of FD industry companies experienced the lowest decrease in value
among industries during the financial crisis (October 2007–March 2009), and the stocks of
FD companies even increased in value by 9 per cent during the period from January 2005 to
March 2009. In addition, the FD industry in Europe offered one of the largest post-crisis
profit potentials, as the sectoral index increased in value by 312 per cent from March 2009 to
October 2018.
We have shown that the specifics of the FD industry become particularly evident periods
of instability, when the counter-cyclical character of the industry and the FD stocks’ status
as safe-haven investments play an important role. However, a turbulent period for the stock
market usually comes with some changing dynamics in macroeconomic variables. If the
variability in the macroeconomic environment is substantial, it might have an impact on
stability and performance of the FD sector relative to other industries and change the
importance of the FD industry in the economy, as well as on stock markets. Therefore, the
main aim of the paper is to estimate and evaluate the impact of macroeconomic
fundamentals on the stock prices of selected FD stocks during the period 2005–2015, which
saw the global financial crisis and its aftermath.
The remainder of the paper is structured as follows. The second section reviews the
relevant literature and specifies the key contribution of the paper. The third section
introduces the data and methodology applied in the analysis. The fourth section presents
the empirical outcomes and discusses the results obtained. The fifth section concludes the
paper with a summary of the key findings.

Literature review
Companies in FD operate in an open system where they are affected by a variety of factors.
In addition to many internal and external factors, the macroeconomy plays an important
role in generating revenue and income for companies in the FD sector, as it can affect the
demand for its products, the costs or other aspects of the business. Despite a wide range of
research on the FD market conducted so far, relatively little attention has been devoted to a
comprehensive analysis of macroeconomic fundamentals on stock returns.
From the individual firm’s perspective, macroeconomic factors are critical exogenous
variables. When macro-variables are relatively stable, they are typically assumed to be
important but more or less static in an FD analysis. McCorkler (1988) stresses that an
increase in international economic interdependence leads to greater instability and that
accelerated rates of change in macro-variables increase their importance, making them
 critical in any food policy analysis or individual firm decision. This was also confirmed by Macroeconomic
Siudek and Zawojska (2012), who state that any changes in the macroeconomic environment factors and
are likely to have major effects on the agri-food sector, taking as an example the latest global stock prices
economic crisis. Furthermore, Mutunga (2014) states that the increased integration and
growing macroeconomic fluctuations require paying more attention to the link between the
“noise” that these fluctuations represent and a company’s own development. Management
must eliminate the effects of the “noise” to obtain a clear picture of the long-term sustainable 1629
profits and, thus, a picture of how the company’s competitiveness can be promoted
(Oxelheim, 2003).
Empirical studies point out many macroeconomic factors of FD performance, such as
economic growth (e.g. Hansen, 2013), interest rates (IR) (Mutunga, 2014), exchange rates (e.g.
Apergis and Rezitis, 2011), inflation (e.g. Taslim, 2017), labour market (e.g. ECSIP
Consortium, 2016), research and development intensity (Hall and Scobie, 2006), whole
monetary and fiscal policies (e.g. Kargbo, 2000), etc. However, empirical analyses show
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differences in the intensity of their individual effects on the FD. In this study, we will focus
on three major macroeconomic variables – economic growth, IR and inflation.
As Hansen (2013) states, economic growth is an important indicator of the economic
situation, and therefore of market size and potential. This fact is also confirmed by the
ECSIP Consortium (2016) report. During the last economic crisis, the growth of
disposable income slowed down and households’ absolute expenditure on food saw a
slightly decreasing trend. Nevertheless, in relative terms, expenditure on food remained
rather constant. The fact that consumers spent a constant share of their disposable
income on food, yet in absolute terms, the growth in expenditure on food slowed,
suggests changes in consumer-purchasing behaviour, such as consumers switching to
cheaper products.
Inflation could affect the FD industry in two ways. On the one hand, the increasing of
input prices could decrease its profits. On the other hand, an increase in food inflation
tends to increase the price of food, which could generate high profits. Bhutta and Hasan
(2013) explored the profitability of firms in the FD sector listed on the Karachi stock
market in Pakistan. They used multivariate regression analysis for the period of
2002–2006. The study was primarily based on firm-specific factors, while only one
macroeconomic factor that of food inflation was included. The relationship between
profitability of the listed companies and inflation was not proven. Taslim (2017)
aimed to analyse firm profitability in the food and beverage industry listed on the Bursa
Malaysia. This study basically identified the impact of specific firm factors that may
contribute to the profitability of a company, but inflation was also included as an external
factor. The correlation analysis showed that there is a negative relationship between a
company’s profitability and inflation. Ball et al. (2010) calculated PPP for agricultural
outputs and inputs for 11 EU countries relative to the USA in 1973–2002. Output prices in
the EU were higher than those in the USA until 1980, indicating lower competitiveness in
the EU. The situation was then reversed, until 1986, when the competitiveness of the EU
deteriorated again with high output prices. Moreover, lower input prices in the USA
rendered the country more competitive in the agri-food sector than the EU during most
of this period.
On the expenditure side, IR should be taken into account as they can affect a
company’s cost of capital. The level and stability of IR may influence the investments of
firms in new equipment and technology, or their upgrades of existing operations in other
ways, and hence their growth and expansion. McCorkler (1988) in his study confirms that
high real IR increase the cost of doing business, and in general, contract demand. A
significant relationship was proved, for example, between IR and the performance of
companies in the FD in Kenya by Mutunga (2014). IR in many instances co-vary with
 BFJ exchange rates, which may be important for producers of export products who are subject
121,7 to competition from imports, those who import inputs for further processing or those who
manufacture and market in foreign countries. In general, a strong domestic currency
makes exports expensive and competing imports cheaper. This situation is frequently
difficult for an export-oriented sector such as the FD. However, due to a possible
correlation between IR and exchange rates, the fact that we cover EU countries mostly
1630 from the Eurozone and that the FD foreign trade is mostly provided in Euro currency, we
omit exchange rates from our analysis.
The studies of selected macro-variables’ impact on FD stock prices in EU countries have
been sparse. However, we can find some findings concerning the significance of the
relationship between economic growth, inflation and IR for entire stock markets. Peiró
(1996) shows that stock returns are directly affected by industrial production and indirectly
affected by changes in IR. Nasseh and Strauss (2000) also find significant responses of stock
prices in France, Germany, Italy, the Netherlands, Switzerland and the UK to improvements
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in industrial production and IR. Rapach et al. (2005) find that IR are the most consistent and
reliable predictors of stock returns and confirm the inflation effect in several European
countries as well. Fernandez-Perez et al. (2014) confirm a negative relationship between
Spanish stock returns and movements in IR with a very high degree of significance. Peiró
(2016) analyses the dependence of stock prices on macroeconomic variables in the three
largest European economies: France, Germany and the UK. According to this study,
industrial production is used as a proxy for economic growth and long-term IR are
important significant variables accounting for approximately one half of annual movements
in stock prices. That IR are the most prominent predictor of long-run developments in stock
prices was also confirmed by Pražák and Stavárek (2017) for the Visegrad countries. They
confirm a significant relationship between inflation and GDP, but the overall effect on the
analysed EU countries is ambiguous.
Given both the previously confirmed effects of selected macro-variables on stock
prices in the EU markets and the theoretically proven link between the macroeconomic
environment and the FD, we hypothesise that macroeconomic factors could potentially
lead to persistent changes in the supply and demand conditions in food markets and could
therefore affect FD stock prices through certain channels. This development could
affect both producers’ and consumers’ decisions, as well as any investment activity
in the FD (Apergis and Rezitis, 2011). Therefore, this study substantially contributes to
scientific discussion in this field and fills the gap in the empirical literature about
the relationship between macroeconomic factors and stock returns in the FD operating in
the EU.

Methodology and data

The studies concerning the issue of the effects of macroeconomic factors on stock prices
tend to fall into three basic methodological groups. The first group adopts the asset
pricing perspective, especially arbitrage pricing theory (APT) or some other multi-factor
asset pricing model. The second group includes studies employing the capital asset
pricing model (CAPM). Despite the fact that CAPM is the most frequently used approach,
Fama and French (2004) argue that the empirical record of the model is poor. CAPM’s
empirical problems reflect theoretical failings, which are the result of many simplifying
assumptions, as well as difficulties in implementing valid tests for the model. The third
group of studies represents empirical models based more on economic intuition than on a
theoretically informed analysis, such as in the case of the APT or CAPM. These empirical
models are developed to capture the empirical regularity between stock prices and a
limited number of macroeconomic variables, usually by employing the most appropriate
econometric techniques.
 This paper falls into the third methodological group and employs the variables based on Macroeconomic
economic intuition described in the previous section. To determine the relative linear factors and
relationship between the monitored variables, we apply a correlation analysis. The stock prices
calculation of the Pearson correlation coefficient is as follows (Brooks, 2002):
P
ðxi xÞðyi yÞ
r xy ¼ ; (1)
ðn1Þsx sy
1631
where x and y are the sample means of X and Y variables; and sx and sy are the corrected
sample standard deviations of X and Y. The Pearson correlation is +1 in the case of a perfect
direct linear relationship, −1 in the case of a perfect inverse linear relationship and some
value in the open interval (−1, 1) in all other cases, indicating a degree of linear dependence
between the variables. The closer the coefficient is to either −1 or 1, the stronger the
correlation between the variables.
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The long-term equilibrium relationships are examined by the Johansen cointegration

test, determining the presence of cointegrating vectors as a vector autoregression (VAR).
We use a maximum-likelihood-based panel test for the cointegrating rank in panels. The
equation for the VAR model is as follows ( Johansen and Juselius, 1990):
X
p1
DYit ¼ C 0 þ Gi DYi;t1 þPYi;t1 þZit ; (2)
i¼1

where Yt is a vector of non-stationary variables; C0 a constant; ηt the white noise term and
ΔYt denotes the rate of growth or changes. The panel data set consists of N cross-sections
observed over T time periods, where i represents the index for the cross-section, t is the
index for the time dimension, j ¼ 1, …, and p denotes the number of factors in each
cross-section. The variables Π and Γ in the matrix contain the value of the cointegrating
vectors. The information in the coefficient matrix between the levels of Π is decomposed as
Π ¼ αβ′, where the relevant elements of the α matrix are adjustment coefficients, and the β
matrix contains the cointegrating vectors. The first likelihood ratio for the null hypothesis of
the precise r cointegrating vectors against the alternative r+1 vector is known as the
maximum eigenvalue statistic. The second statistic for the hypothesising of at most r
cointegrating vectors against the alternative is known as the trace statistic.
If the factors are non-stationary and cointegrated, we employ the vector error
correction model (VECM) to test the causation between variables, which is a VAR
model in the first differences with the addition of a vector of cointegrating residuals.
Therefore, this VAR system does not lose long-run information. We apply the following
VECM specification:
Dyit ¼ Pyi;tk þG1 Dyi;t1 þ G2 Dyi;t2 þ    þGk1 Dyi;tðk1Þ þuit ; (3)
where Δyt means rate of growth or changes; and ut denotes a n×1 vector of
unobservable error terms. The variables Π and Γ in the matrix contain the value of the
cointegrating vectors.
Tested companies are engaged exclusively in the production of food products and
beverages. The sample does not include companies that may be part of the FD according to
some stock exchanges but that have business focusses outside of FD production, such as
restaurant chains, technology research companies in the FD, enterprises providing
exclusively logistics services for food intermediates and products, etc. To ensure a
sufficiently long time series for statistical testing, we included only companies operating on
stock exchanges at least during the period 2005Q4–2015Q4. The analysis includes
companies traded on stock exchanges of those EU member countries where at least four
 BFJ companies can be found matching the required business subject and length of time series so
121,7 that a relevant sample is available to evaluate the results for each country as a whole. Thus,
to obtain the relevant results of the effects of selected macro-variables on the stock prices in
FD in the EU, we include companies from Austria, Croatia, Cyprus, Denmark, Finland,
Germany, Ireland, Italy, Lithuania, Poland, Spain and the UK into the empirical testing for
the period of 2005Q4–2015Q4.
1632 Based on the literature review, the GDP per capita for economic growth (GDP), IR and the
Food Price Index (FPI) as an inflation indicator for FD are chosen for testing as
macro-variables. All of the time series are on the quarterly frequency. Macroeconomic
variables are obtained from the Eurostat database and are in the Euro currency. The data
for individual stock prices are obtained from Yahoo Finance and Stooq. Stock prices are
denominated in local currencies and the data are therefore set in an index form to make it
unit-free. The basic statistical characteristics of selected stock prices in individual countries
are summarised in Table I.
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The stock prices of food companies developed differently in individual countries.

However, the minimum values of the stock prices of the FD companies reached very low
levels during the sample period. The significant declines in the stock prices of food
companies followed the global financial crisis and the Eurozone crisis in a majority of the
selected companies. The lowest market risk was found in Lithuanian and Danish food
companies, and the highest market risk was related to Finnish and Polish food companies.

Results
Correlation analysis was used to determine the relative linear relationship between the
monitored variables. The results of the correlation coefficients of macroeconomic factors
with FD stock prices are shown in Table II. The estimated coefficients show the range of a
weak to a very weak link between the variables. Given the statistically significant
relationships, we can see that only in the case of Cyprus and the UK is a positive
relationship between stock prices and the GDP is observed. In this case, economic growth
seems to be an important indicator of the economic situation and, therefore, of market size
and the overall demand for FD products. The results of the correlation analysis for Cyprus
and UK could be affected by the reaction of FD to the recent financial crisis. Although the
FD in these economies was also affected during this period, which was marked by a
decline in gross value added (in absolute terms), the performance of the industry was still
above the level of other industries. Furthermore, the economy of Cyprus did not face a
considerable decrease during the financial crisis, as in the case of the other tested
countries. In other cases, we can see an indirect link between FD stock prices and the GDP,
which signifies that these stocks could be used as safe havens for investors in times of
recession. Furthermore, the results of the correlation analysis show that the rise in IR and
FPI is connected to the decline in FD stock prices, which is wholly in accordance with
economic theory.
Since the choice of lag orders of the variables in the Johansen cointegration test and
VECM specification can have a significant effect on the inferences drawn from the model,
we determined the appropriate lag length for each variable sequentially in the second part of
the analysis. Based on the results of the Akaike information criterion applied to the
non-differenced VAR model in order to select the optimal lag length for every cointegration
test, we set the appropriate lag to 1, i.e., one quarter, as we employ a time series on the
quarterly frequency. On the basis of the lag length selection criteria, we performed Johansen
cointegration tests to see whether there is a long-run equilibrium between the logs of FD
stock prices and logs of selected macroeconomic fundamentals. Logarithmic transformation
was performed to reduce skewness and heteroscedasticity in the time series and to stabilise
their variability. The results of the cointegration tests are summarised in Table III.
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Stat. Austria Croatia Cyprus Denmark Finland Germany Ireland Italy Lithuania Poland Spain UK

Mean 526.3854 7,770.713 342.9364 280.7206 1,968.393 1,835.402 2,566.679 4,173.033 80.50848 4,218.545 2,131.536 1,019.437
Median 74.14140 350.2600 0.434000 141.0000 13.42000 10.50000 1,863.000 3.900250 1.790000 12.63500 8.360000 126.3060
Maximum 2,645.670 114,895.0 4,935.550 1,210.670 12,290.15 11,966.17 9,408.120 42,756.46 569.0400 66,077.69 15,182.30 3,663.580
Minimum 0.010000 10.00000 0.001000 9.558160 3.370000 2.000000 203.5000 0.158650 0.040000 0.290000 0.230000 2.000000
SD 939.4332 20,605.91 950.8951 254.9816 3,443.656 3,300.052 2,201.511 9,968.470 163.3592 13,297.82 4,356.920 1,259.899
Skewness 1.516615 3.233305 3.288211 1.171543 1.361663 1.433984 1.281186 2.331392 1.716341 3.027591 1.680317 0.902270
Kurtosis 3.336229 13.06029 13.63117 4.077011 3.286431 3.508180 3.929704 7.448728 4.208657 10.56051 4.135145 2.188539
J. Berra 79.55313 2,199.033 1,067.853 56.80215 49.36544 57.97053 50.77234 425.7106 113.1272 1,763.157 107.4748 33.43920
Probability 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000
Observations 205 369 164 205 158 164 164 246 205 451 205 205
Source: Authors’ calculations
Macroeconomic

1633
stock prices

Summary statistics of
factors and

Table I.

in tested countries
selected stock prices
 BFJ Economy GDP IR FPI
121,7
Austria 0.0232 0.0324 0.0794
Croatia −0.0366 0.0681 −0.1421*
Cyprus 0.1994** −0.6061* −0.1373***
Denmark 0.0921 −0.1282*** 0.0266
Finland −0.1375*** 0.0005 −0.1634**
1634 Germany 0.0769 −0.0732 0.0412
Ireland −0.1375*** 0.0019 0.3115*
Italy −0.0074 −0.1394** −0.0759
Lithuania −0.3058* −0.1491** −0.3853*
Poland −0.1442* −0.0566 −0.1630*
Table II. Spain 0.1017 −0.1647** −0.0126
Results of correlation UK 0.1941* −0.1265*** −0.0657
analysis in tested Notes: *,**,***Significant at 1, 5 and 10 per cent levels, respectively
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countries Source: Authors’ calculations

We report estimated trace statistics and maximum eigenvalue statistics for the null
hypothesis of no cointegration, of at most one cointegration vector, of at most two
cointegration vectors and of at most three cointegration vectors, respectively.
In the case of Austria, the long-term relationship was confirmed both with the ATX
index and with all the monitored companies. Ottakringer has the presence of up to two
cointegrating vectors. The presence of the cointegration relationship was also confirmed
in all the Croatian companies listed on the Croatian stock exchange index Crobex. In
Cyprus, a cointegration relationship was found only in the Blue Island company. In the
case of Finland, one cointegration vector was found in the companies of Hkscan and Olvi.
Furthermore, a cointegration relationship was established in one company in Ireland
(Diaego), two companies in Spain (Deoleo, Vidrala) and four companies in Poland (Ambra,
Colian, Indykpol, Wilbo) and Italy (Bioera, Campari, Parlamat, Valsoia). In the case of
Lithuania, a cointegration relationship was demonstrated in all the companies surveyed,
with two cointegration vectors confirmed in two companies (Vilnius, Pieno). The
interrelationship between the macroeconomic environment and stock prices is confirmed
by the presence of a cointegration relationship in the UK, Poland, Italy and Lithuania
stock exchange indices. The cointegration analysis clearly demonstrated that the stock
price development of the abovementioned FD companies is significantly related to the
development of representative macroeconomic variables in the long term. In contrast, only
FD companies in Denmark and Germany remained free of any long-term relationship in
the sample period.
In the case where at least one cointegration relationship was found, the VECM model
was subsequently created. The results of VEC models for individual companies with
proven long-term links to GDP, IR and FPI are shown in Table IV. Given the VEC
mechanism that is embedded in the Johansen procedure, the deviation from long-run
equilibrium is corrected by a series of partial short-run adjustments. The VECM
specification restricts the long-run behaviour of the variables in the system to converge on
their long-run relationship while allowing a wide range of short-run dynamics. The
number of lags is set to one for all the models and similarly to prior estimations, the
optimal number was set using the Akaike information criterion. The VECM was used to
correct deviations from the equilibrium relationship. The results capture the relationship
between the observed variables, the statistical significance of the resulting relationships,
the Johansen cointegration equation and the total significance of the VEC model through
F-statistics; the VECM results also provided the overall variance of the variability of the
model (R2). Based on the results of the statistical significance of the cointegration
 Company Trace test statistics Probability Max-Eign test statistics Probability
Macroeconomic
factors and
Hypothesis of no cointegration – Austria stock prices
ATX_Austria 71.3368 0.0007 45.5741 0.0002
Agrana_Austria 59.8891 0.0139 39.4747 0.0014
Manner_Austria 60.7884 0.0112 40.1365 0.0011
Schlumberger_Austria 66.7582 0.0025 37.0543 0.0033
1635
Hypothesis of at most 1 cointegration relationship – Austria
Ottakringer_Austria 37.1447 0.0304 20.4565 0.0886
Hypothesis of no cointegration – Croatia
Crobex_Croatia 80.2451 0.0000 50.8735 0.0000
Badel_Croatia 79.5586 0.0001 46.5237 0.0001
Belje_Croatia 88.4131 0.0000 61.7579 0.0000
Termes_Croatia 68.8935 0.0014 51.4149 0.0000
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Jamnica_Croatia 83.6906 0.0000 57.7826 0.0000

Puljanka_Croatia 68.5444 0.0015 45.0059 0.0002
Podravka_Croatia 89.3019 0.0000 51.2316 0.0000
Viro_Croatia 73.4031 0.0004 52.2519 0.0000
Zvijezda_Croatia 73.8286 0.0003 54.0793 0.0000
Hypothesis of no cointegration – Cyprus
Cyprus main and Parallel 53.1028 0.0610 24.1748 0.1657
Blue_Island_Cyprus 67.0959 0.0023 29.6733 0.0362
Keo_Cyprus 43.5854 0.3047 26.4649 0.0911
Renos_Cyprus 60.5690 0.0118 35.6549 0.0053
Hypothesis of no cointegration – Denmark
OMX index 38.8053 0.5311 20.2950 0.3899
Carlsberg_Denmark 47.4818 0.1699 29.1449 0.0424
Harboes_Denmark 33.0582 0.8082 16.9905 0.6616
Unibrew_Denmark 40.9802 0.4220 19.4483 0.4555
FirstFarms_Denmark 33.1741 0.8035 18.3557 0.5456
Hypothesis of no cointegration – Finland
OMX Helsinki 39.3306 0.5043 16.8024 0.6773
Atria_Finland 47.0847 0.1811 27.9129 0.0608
Hkscan_Finland 56.5685 0.0295 37.1518 0.0032
Olvi_Finland 52.6184 0.0671 27.0050 0.0785
Hypothesis of no cointegration – Germany
DAX_Germany 40.0470 0.4680 19.2371 0.4725
Moninger_Germany 52.8377 0.0643 24.3202 0.1597
Schwalbchen_Germany 50.6345 0.0980 24.2299 0.1634
Wasgau_Germany 42.3546 0.3578 19.8912 0.4205
Hypothesis of no cointegration – Ireland
ISEQ Ireland 34.9332 0.7259 18.0716 0.5696
Diaego_Ireland 54.4226 0.0466 28.0826 0.0579
Glabnia_Ireland 46.4336 0.2009 20.9449 0.3433
Kerry_Group_Ireland 54.7651 0.0434 23.8095 0.1812
Hypothesis of no cointegration – Italy
FTSE Italia 49.4030 0.1225 33.6773 0.0102
La_Doria_Italy 59.1642 0.0164 30.0068 0.0327
Bioera_Italy 50.6900 0.0970 31.1868 0.0227
Campari_Italy 43.0558 0.3270 26.6904 0.0856 Table III.
Results of Johansen
Fisher panel
(continued ) cointegration test
 BFJ Company Trace test statistics Probability Max-Eign test statistics Probability
121,7
Parmalat_Italy 58.6593 0.0185 35.4533 0.0056
Valsoia_Italy 51.7535 0.0794 32.0921 0.0171
Hypothesis of no cointegration – Lithuania
Gubernija_Lithuania 83.2852 0.0000 53.7481 0.0000
1636 Zemaitijos_Lithuania 81.0074 0.0000 51.1529 0.0000
Vilkyskiu_Lithuania 80.3137 0.0000 50.8244 0.0000
Hypothesis of at most 1 cointegration relationship – Lithuania
Vilnius General 36.5677 0.0353 24.7007 0.0227
Pieno_Lithuania 34.2355 0.0632 23.6472 0.0322
Hypothesis of no cointegration – Poland
WIG Poland 61.2272 0.0101 41.0236 0.0008
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Ambra_Poland 54.0265 0.0505 30.9109 0.0248

Atlanta_Poland 41.8577 0.3805 22.4858 0.2470
Colian_Poland 52.6159 0.0672 29.8922 0.0339
Gobarto_Poland 49.0314 0.1307 21.6210 0.2984
Zywiec_Poland 47.4959 0.1695 22.0720 0.2708
Indykpol_Poland 51.1907 0.0883 28.6159 0.0496
Kruszwice_Poland 30.9925 0.8821 14.5344 0.8474
Pepees_Poland 45.3048 0.2386 22.6385 0.2386
Wawel_Poland 51.7738 0.0791 25.0023 0.1343
Wilbo_Poland 53.4957 0.0563 29.7062 0.0358
Hypothesis of no cointegration – Spain
IBEX Madrid 66.3061 0.0028 41.0431 0.0008
Bodegas_Spain 54.2821 0.0479 26.0587 0.1017
Deoleo_Spain 59.9883 0.0136 29.6464 0.0365
Natra_Spain 55.2073 0.0395 25.4118 0.1207
Vidrala_Spain 69.4627 0.0012 31.0633 0.0236
Hypothesis of no cointegration – UK
FTSE_ALL_London 54.3542 0.0472 25.8904 0.1064
British_Foods_UK 38.9249 0.5250 20.1010 0.4045
Finsbury_UK 40.2099 0.4599 16.7963 0.6778
Premier_Food_UK 49.8981 0.1121 30.6364 0.0270
Real_Food_UK 46.7875 0.1900 21.1697 0.3279
Table III. Source: Authors’ calculations

equation, the VECM corrected the long-run relationship in seven cases (Manner in Austria,
Termes in Croatia, Blue Island and Renos in Cyprus, Gubernija in Lithuania, WIG in
Poland and Vidrala in Spain). In these cases, the final model was also statistically
significant. The only model with explanation of more than 60 per cent of the total
variability was the model for the stock exchange index WIG in Poland. The other models
had lower explanatory power but still demonstrated the clear effects of macroeconomic
factors on the performance of the abovementioned FD companies. Given that no
statistically significant cointegration link was demonstrated for Denmark, Germany and
Ireland, it was not possible to estimate the VEC model for these countries. The overall
effect of the investigated variables can be stated only on the basis of a correlation, not a
cointegration analysis.
Table V shows the prevailing influence of individual macroeconomic variables in
countries with a proven long-term relationship. The indicator of GDP has a positive effect
on stock price developments in most cases. The results are in accordance with the paper
by Hansen (2013) and confirm the assumption that GDP should be seen as one of the
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Austria Croatia
ATX Agrana Manner Ottakringer Schlumberger Badel Belje Crobex Jamnica Podravka Puljanka Termes Viro Zvijezda
GDP (−1) −0.038592 −0.699105 −0.662578 −0.404812 −3.845381 0.375031 0.483925 0.285222 0.575072 0.435389 0.944151 0.537982 0.676506 0.659854
(0.22567) (0.49807) (0.44152) (0.69962) (7.47101) (0.64443) (0.40875) (0.33122) (0.35693) (0.29479) (0.71710) (0.52114) (0.49235) (0.44295)
[−0.17101] [−1.40364] [−1.50068] [−0.57862] [−0.51471] [0.58196] [1.18390] [0.86112] [1.61117] [1.47695] [1.31663] [1.03233] [1.37405] [1.48970]
IR (−1) −0.000322 −0.035924 −0.120421 −0.097001 0.572507 0.463408 0.378845 0.219932 −0.112480 0.036092 0.385779 0.297044 0.553973 0.231359
(0.04084) (0.08303) (0.07577) (0.11961) (1.26861) (0.47952) (0.28454) (0.23218) (0.26354) (0.22178) (0.51943) (0.35900) (0.36016) (0.32299)
[−0.00788] [−0.43265] [−1.58939] [−0.81096] [0.45129] [0.96640] [1.33141] [0.94727] [−0.42681] [0.16274] [0.74270] [0.82742] [1.53813] [0.71631]
FPI (−1) −0.252965 −0.205104 0.162181 −0.657338 10.99965 0.576036 0.623762 0.136061 −0.198536 0.398257 −0.547127 −0.083416 0.413640 −0.212846
(0.16307) (0.33190) (0.31568) (0.46527) (5.09194) (0.89954) (0.54473) (0.43722) (0.50130) (0.41366) (0.98355) (0.67852) (0.67990) (0.60857)
[−1.55130] [−0.61797] [0.51376] [−1.41281] [2.16021] [0.64037] [1.14508] [0.31120] [−0.39604] [0.96277] [−0.55628] [−0.12294] [0.60839] [−0.34975]
CointEq 0.051148 −0.018375 0.000522 0.070615 −0.178782 −0.007202 −0.009021 −0.010569 0.028474 −0.025502 −0.011956 −0.007998 −0.033240 −0.008229
(0.02932) (0.01635) (0.00018) (0.09727) (0.10273) (0.00571) (0.00477) (0.00462) (0.02454) (0.01073) (0.00581) (0.00262) (0.01526) (0.00455)
[1.74428] [−1.12388] [2.83837] [0.72600] [−1.74024] [−1.26063] [−1.89206] [−2.28750] [1.16022] [−2.37665] [−2.05891] [−3.04999] [−2.17835] [−1.80965]
R2 0.123843 0.078831 0.506460 0.374418 0.381316 0.028236 0.213747 0.232176 0.161277 0.180365 0.109493 0.287850 0.255442 0.152333
Adj. R2 0.020766 −0.029542 0.448397 0.300820 0.308529 −0.086089 0.121246 0.141843 0.062603 0.083937 0.004728 0.204068 0.167847 0.052607
F-statistics 1.201456 0.727405 8.722527 5.087347 5.238833 0.246981 2.310768 2.570239 1.634452 1.870471 1.045127 3.435693 2.916176 1.527517
Cyprus Finland Italy Lithuania
Blue Renos Hkscan Olvi Bioera Campari Parmalat Valsoia Gubernija Pieno Vilkyskiu Vilnius Zemaijtios
Island
GDP (−1) 1.549950 1.675770 0.232255 0.571283 0.033769 −1.752456 1.708775 0.939832 −1.381888 −0.551953 −1.163682 0.011102 −0.609616
(1.15042) (2.14758) (0.83419) (0.63277) (1.25375) (1.18721) (0.49327) (0.78571) (1.08866) (0.54293) (0.53603) (0.26857) (0.51749)
[1.34729] [0.78031] [0.27842] [0.90283] [0.02693] [−1.47611] [3.46420] [1.19615] [−1.26935] [−1.01662] [−2.17094] [0.04134] [−1.17802]
IR (−1) 0.265157 0.582114 −0.205676 −0.017656 0.097742 0.255103 −0.135737 −0.485557 −0.504109 −0.153556 0.120266 0.029805 −0.202148
(0.83737) (1.28968) (0.34947) (0.18732) (0.44003) (0.53688) (0.16951) (0.27834) (0.54584) (0.26774) (0.26166) (0.13566) (0.25090)
[0.31665] [0.45136] [−0.58853] [−0.09426] [0.22213] [0.47516] [−0.80074] [−1.74449] [−0.92355] [−0.57353] [0.45963] [0.21971] [−0.80568]
FPI (−1) −1.162231 −2.607770 −0.987760 −0.389476 0.993269 −2.175442 0.474223 −0.394569 1.796341 0.250784 0.530695 0.620078 0.054191
(0.43447) (0.89236) (1.17573) (0.70159) (1.11709) (1.37217) (0.46370) (0.74328) (1.56985) (0.83713) (0.74026) (0.36642) (0.78176)
[−2.67508] [−2.92234] [−0.84012] [−0.55513] [0.88916] [−1.58541] [1.02270] [−0.53085] [1.14427] [0.29958] [0.71691] [1.69224] [0.06932]
CointEq −0.317949 −0.214431 −0.117357 −0.178863 0.000413 −0.034565 −0.030593 0.031805 −0.185225 −0.030040 0.005390 0.021658 −0.065389
(0.11938) (0.08706) (0.15325) (0.09613) (0.01955) (0.01600) (0.01668) (0.04266) (0.06806) (0.04511) (0.00365) (0.02480) (0.05658)
[−2.66334] [−2.46307] [−0.76580] [−1.86062] [0.02112] [−2.16098] [−1.83428] [0.74549] [−2.72138] [−0.66594] [1.47603] [0.87312] [−1.15577]
R2 0.470411 0.260965 0.069445 0.193543 0.012320 0.167811 0.352590 0.235167 0.246140 0.055598 0.215654 0.131880 0.089655
Adj. R2 0.408107 0.174020 −0.040032 0.098666 −0.103878 0.069906 0.276424 0.145186 0.157451 −0.055508 0.123378 0.029749 −0.017445
F-statistics 7.550186 3.001490 0.634335 2.039936 0.106024 1.714024 4.629230 2.613535 2.775310 0.500409 2.337053 1.291276 0.837118
Poland Spain UK
WIG Ambra Colian Indykpol Wilbo IBEX Deoleo Vidrala FTSE
GDP (−1) 0.347968 1.216544 0.586673 −0.094235 0.414576 0.012013 1.725888 2.407082 0.336143
(0.12935) (0.47765) (0.42923) (0.38986) (0.39514) (0.32922) (1.92902) (0.79873) (0.33922)

(continued )
Macroeconomic

1637
stock prices
factors and

Table IV.

companies
models for individual
Results of VEC
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BFJ
121,7

1638

Table IV.
[2.69009] [2.54692] [1.36680] [−0.24171] [1.04918] [0.03649] [0.89470] [3.01363] [0.99094]
IR (−1) −0.162877 −0.161229 −0.203938 −0.022735 −0.336157 −0.008961 −1.219060 −0.481937 −0.110890
(0.12738) (0.43499) (0.44379) (0.44405) (0.53702) (0.16775) (0.95543) (0.32781) (0.09155)
[−1.27868] [−0.37065] [−0.45954] [−0.05120] [−0.62597] [−0.05342] [−1.27592] [−1.47018] [−1.21120]
FPI (−1) 0.916657 0.230711 −0.912101 −0.561220 −0.468311 −0.164676 0.374101 −0.520976 −0.125176
(0.20218) (0.73436) (0.71773) (0.71917) (0.81763) (0.20097) (1.10821) (0.30346) (0.27836)
[4.53379] [0.31417] [−1.27081] [−0.78037] [−0.57277] [−0.81942] [0.33757] [−1.71680] [−0.44969]
CointEq −0.415390 −0.054323 −0.204323 −0.234049 −0.124096 −0.050136 0.043315 −0.677519 0.116238
(0.06492) (0.05991) (0.13851) (0.12991) (0.15169) (0.07614) (0.04522) (0.17192) (0.14839)
[−6.39807] [−0.90673] [−1.47513] [−1.80164] [−0.81808] [−0.65848] [0.95782] [−3.94095] [0.78334]
R2 0.689148 0.329098 0.204972 0.217557 0.144843 0.069945 0.091592 0.363694 0.142619
Adj. R2 0.652578 0.250168 0.111440 0.125504 0.044237 −0.039473 −0.015280 0.288834 0.041750
F-statistics 18.84424 4.169506 2.191451 2.363405 1.439698 0.639248 0.857024 4.858345 1.413908
Note: Standard errors in ( ) and t-statistics in [ ]
Source: Authors’ calculations
 important indicators of the economic situation, and therefore of market size and potential Macroeconomic
for the FD company. In contrast, the effects of FPI and IR on the FD stock price factors and
development are generally negative. The results for FPI are similar to those by Taslim stock prices
(2017), who used a different model, but came to the same conclusion that there is an
indirect relationship between inflation and performance of FD stock prices. This suggests
that increasing input prices could decrease the profits of tested companies and therefore
their stock prices. Based on the results, IR can affect a company’s cost of capital in an 1639
indirect way. As McCorkler (1988) states, high real IR increase the cost of doing business,
and in general, contract demand. This fact could lead to a decrease in the stock prices of
companies in the FD industry.

Conclusion
The performance of companies operating in the FD industry is affected by many factors.
The aim of this paper was to estimate and evaluate the impact of macroeconomic
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fundamentals on stock prices of selected FD stocks during the period 2005–2015, which saw
the global financial crisis and its aftermath. We employ a correlation analysis and Johansen
cointegration with the VEC mechanism for EU companies for this purpose. Despite the fact
that economic theory usually considers this sector stable and more resistant to economic
cycles than others, this paper demonstrates that even FD companies are affected by the
macroeconomic environment.
Based on the results of FD companies from Austria, Croatia, Cyprus, Denmark,
Finland, Germany, Ireland, Italy, Lithuania, Poland, Spain and the UK, we can state that
GDP has a generally positive effect on stock price developments. Therefore, GDP should
be seen as one of the important indicators of the economic situation and, thus, of market
size and potential for FD companies. The IR should be taken into account as well, as they
can affect a company’s cost of capital. The level of IR may influence firms when making
decisions to invest in new equipment and technology or to upgrade their existing
operations in other ways, hence affecting their growth and expansion. This fact was
confirmed by the negative coefficient estimated by the correlation analysis, cointegration
procedure and the VEC model in most cases. The results of the analysis of the effects of
inflation on FD stock prices suggest that increasing input prices could decrease their stock
prices, which is probably because the price increases for inputs could decrease the profits
of tested companies.
This paper clearly demonstrated the effects of selected macro-variables on FD stock
prices in the EU markets. Macroeconomic factors shape a company’s performance and could
potentially lead to persistent changes in supply and demand conditions in FD markets,
which could therefore affect FD stock prices through certain channels. These results could
be beneficial for FD companies when making their economic decisions, for policy makers

Economy GDP IR FPI

Austria − − −
Croatia + + +
Cyprus + + −
Finland + − −
Italy + − −
Table V.
Lithuania − − +
Prevailing effect of
Poland + − − macroeconomic
Spain + − − variables on stock
UK + − − price development in
Source: Authors’ calculations tested countries
 BFJ when creating a macroeconomic environment for one of the most important industries, and
121,7 for investors when making investment decisions based on the development of tested
macroeconomic fundamentals.

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Corresponding author
Jana Šimáková can be contacted at: simakova@opf.slu.cz
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