GDP Growth and National Index Returns in Seven European Economies

In this investigation a model is constructed in order to determine whether there exists a correlation between GDP growth in a given European nation and national stock index growth in that same European nation. The model investigates three potential cases: a correlation between GDP growth and national stock index growth in the same quarter, a correlation between GDP growth and national stock index growth in the following quarter and a correlation between GDP growth and national stock index growth in the two quarters later. This is done by inputting % GDP growth per quarter as the X-variable and national stock index log growth as the Y-variable. 7 countries were used in the model and the data points used spanned from Q1 of 2000 to Q4 of 2025. Panel Linear Regression Models were also constructed up to a 5 Quarter delay, including all nations in one model using dummy variables. In the single country models, the investigation finds that there exists no statistically significant correlation between the two variables, except in the panel models and this is likely down to the number of external variables which influence index returns separately from GDP growth and economic prosperity in a given nation. The panel models suggest a statistically significant correlation at a 2-3 quarter delay, but the weakness of this correlation indicates that it likely has little to no economic or practical importance.