Causal interrelations among market fundamentals: Evidence from the European Telecommunications sector

• We investigate the interrelationship among financial and macro variables for the European Telecommunications industry.
• We apply the following three approaches VAR analysis, Granger causality and Impulse response functions.
• The goal is to identify whether similar financial behavior can be recognized for Telecom Institutions.
• It was hard to identify common behavior, although these institutions had and have mutual characteristics.

This study investigates the interdependence of some major financial variables applied to several European Telecommunications institutions using a multivariate vector autoregressive (VAR) approach. In particular, this paper examines the bilateral relationships among market fundamental variables, such as stock returns, index returns, earnings, capital expenditures and interest rate, with respect to causality and impulse responses, for companies that play major role in their home stock markets. Unlike the fact that the selected Telecommunications companies have many similar characteristics, this research finds that only few of them support common behavior.