Correlation analysis of the relationship between stock indices and macroeconomic indicators of Ukraine

Abstract

The article examines the comprehensive empirical analysis of the structural and functional relationships between Ukraine’s key stock indices (UX, PFTS) and the country’s fundamental macroeconomic indicators – real GDP at 2014 prices, inflation, and FDI – for 2015-2024. In developed economies, the stock market serves as a "barometer" of economic health; however, the Ukrainian financial landscape is characterized by chronic illiquidity, a narrow base of institutional investors, and a limited number of blue-chip issuers. This creates a significant research gap regarding the predictive value of domestic stock indices for real economic shifts, especially during periods of geopolitical instability and systemic transformations. The primary objective of this research is to apply rigorous statistical methods, specifically correlation and regression analysis, to quantify the impact of Foreign Direct Investment (FDI) and the UX and PFTS indices on real GDP performance during the 2015–2024 period. The study employs Pearson correlation coefficients calculated on the first differences of time-series data (n=9) to ensure stationarity and avoid spurious correlations. The empirical findings indicate a robust and statistically significant positive correlation between real GDP growth and changes in Foreign Direct Investment (r = 0.79; p < 0.05), suggesting that external capital remains a primary driver of the national economy. In contrast, the Ukrainian stock market demonstrates a "market deafness" phenomenon: the correlation between the UX index and GDP growth is weak and statistically insignificant (r = 0.32). Regression modeling further confirms this disparity: the FDI-based model explains 62% of the variance in GDP (R² = 0.62), whereas the stock market model shows negligible predictive power (R² = 0.10; p = 0.40). The study concludes that the Ukrainian stock market currently fails to perform its classical signaling and allocative functions. The results emphasize the urgent need for institutional reforms and the introduction of new financial instruments to integrate the stock market into the post-war recovery strategy. These findings are valuable for policymakers and investors seeking to understand the transmission mechanisms between financial assets and the real sector in emerging markets.