How Interest Rates Change Shape Stock Market Prices : A thesis study on impact of Interest Rates changes on Stock Market Prices
Kalutharage Dona, Gimhani (2025)
2025
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2025072923712
https://urn.fi/URN:NBN:fi:amk-2025072923712
Tiivistelmä
This thesis explores how changes in interest rates set by the European Central Bank (ECB) have influenced the Finnish stock market, particularly the OMX Helsinki 25 Index, between 2015 and 2024. During this time, interest rates in Europe ranged from historically low—even negative—levels to sharp increases. That made it a great period to study how monetary policy affects the market.
After analysing the data using tools like correlation and regression, the results showed only a weak connection between interest rates and stock prices. In fact, interest rates explained just about 6% of the stock market’s behaviour during this time. For example, while stocks generally rose when interest rates were negative (2015–2021), they fell by around 20% during the sharp interest rate hikes in 2022–2023.
These results suggest that interest rates alone don’t determine how the market moves. Other factors—like how investors feel about the economy, or what’s happening globally—seem to matter more. When interest rates started rising in 2022, stocks were already peaking, which points to the role of investor expectations and sentiment.
This research helps us better understand how a small, open economy like Finland responds to big decisions made by the ECB. It also opens the door to future research that digs deeper into different industries or compares Finland with other Eurozone countries.
After analysing the data using tools like correlation and regression, the results showed only a weak connection between interest rates and stock prices. In fact, interest rates explained just about 6% of the stock market’s behaviour during this time. For example, while stocks generally rose when interest rates were negative (2015–2021), they fell by around 20% during the sharp interest rate hikes in 2022–2023.
These results suggest that interest rates alone don’t determine how the market moves. Other factors—like how investors feel about the economy, or what’s happening globally—seem to matter more. When interest rates started rising in 2022, stocks were already peaking, which points to the role of investor expectations and sentiment.
This research helps us better understand how a small, open economy like Finland responds to big decisions made by the ECB. It also opens the door to future research that digs deeper into different industries or compares Finland with other Eurozone countries.