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Stock prices are an important indicator of a company’s forecasted future profitability. Knowing the importance of it, this research examines the influencing factors of stock price fluctuations among top companies traded actively on the Frankfurt Stock Exchange. This study offers a thorough framework for analyzing market dynamics by combining firm- specific variables like financial ratios (Debt-to-Equity, Price-to-Earnings, and Price-to-Sales) with macroeconomic factors such as M2 money supply and Foreign Direct Investment. Using a panel dataset of 10 DAX-40 companies spanning six years with quarterly observations, this study uses advanced econometric techniques to guarantee robust and reliable results. The findings indicate that while the Debt-to-Equity ratio exhibits a negative correlation with stock prices, the DAX performance Index, Price-to-Earning, Price-
to-Sales ratio, and M2 money supply have significant positive impact. Foreign Direct Investment was found to have a detrimental effect on stock prices, indicating intricate external dependencies. By filling in the gaps between firm-specific, and macroeconomic factors, these findings contribute to the academia and provide actionable information to investors and policymakers. This paper adheres to the IMRaD framework, which includes a thorough literature review, methodology, empirical findings, and an analysis of the results.
Through the examination of both theoretical and practical dimensions, this study contributes to the understanding of stock market dynamics in the context of Germany’s financial and economic systems. |
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