Advanced Search
MyIDEAS: Login to save this article or follow this journal

Productivity and stock prices

Contents:

Author Info

  • Avouyi-Dovi, S.
  • Matheron, J.

Abstract

This study looks at the degree of correlation between stock prices and productivity at different levels, i.e. analysis of the correlations between certain components of the two variables and how correlations vary according to the different frequencies characterising these variables. It should be acknowledged that the approach used is only designed to isolate the stylised facts related to the cyclical components of the variables under review and not to explain them. In particular, the method chosen cannot be used to make forecasts or to provide a refi ned economic interpretation of these stylised facts. Nonetheless, this analysis, applied to the United States and the euro area over the period 1973(1)-1985(4), highlights the following points: • in the United States, an increase (or reduction) in the cyclical component of the rate of stock returns is positively correlated with current or future increases (or reductions) in that of the productivity growth rate; • in the euro area, this correlation is less strong. It appears, for example, that a sharp fall in stock prices precedes a marked decline in productivity (link between stock prices and future productivity) and, as a result, in profi ts. This fall could then be interpreted as a normal, even desirable, adjustment mechanism for asset prices. Correspondingly, a sharp rise in stock prices should not automatically be interpreted as the emergence of a future bubble given that such rises appear to foreshadow an increase in productivity and therefore in profi ts. Over the most recent period 1986(1)-2002(4), these correlations appear less pronounced, thus indicating a possible break. Our result is robust given that two complementary methods corroborate it and that it is similar to Estrella’s (2003) findings for the United States. This pattern appears to suggest that the cyclical component of stock prices is in phase with that of productivity.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.banque-france.fr/fileadmin/user_upload/banque_de_france/publications/Revue_de_la_stabilite_financiere/etud3_0506.pdf
Download Restriction: no

Bibliographic Info

Article provided by Banque de France in its journal Financial stability review.

Volume (Year): (2006)
Issue (Month): 8 (May)
Pages: 81-94

as in new window
Handle: RePEc:bfr:fisrev:2006:8:3

Contact details of provider:
Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
More information through EDIRC

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Clerc, L., 2007. "Understanding Asset Prices: Determinants and Policy Implications," Working papers, Banque de France 168, Banque de France.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bfr:fisrev:2006:8:3. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael brassart).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.