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The Co-Movement Connection Between The Gdp And The Main Stock Market Index. The Cases Of Usa And Romania

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  • IOAN ROXANA

    (FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION WEST UNIVERSITY OF TIMISOARA)

Abstract

A recurring problem among economists is that of the connection supposed to exist between the Gross Domestic Product and the main stock market index. Several studies have been conducted, trying to analyze the existence and the extent of this connection, most of them concluding the fact that this relation, if existing, is not a statistically significant one. The analyzed relations between a certain country’s Gross Domestic Product and its main stock market index are mainly concentrated with studying correlations, regressive dependencies or cointegration connections calculated by taking into consideration the level of both time series. The best measure of an economy’s performance and evolution is the Gross Domestic Product, an indicator that suggests every step taken by that economy, including its cyclical oscillations. Among specialists, the stock market is seen as a barometer of the global economy, as investors try to exit the stock market before recessions and conversely they return to the stock market just as economy starts to recover. Thus, we find appropriate to analyze the connection between the stock market and the global economy from a cyclical evolution point of view. Therefore, we will take into consideration both GDP’s and stock market index’ cyclical components, as extracted using the Hodrick Prescott filter. The cyclical components’ comovement will then by studied using a procedure proposed in 2009 by Pirtea, Pătru, Dima and Cristea.

Suggested Citation

  • Ioan Roxana, 2015. "The Co-Movement Connection Between The Gdp And The Main Stock Market Index. The Cases Of Usa And Romania," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 186-192, December.
    • Handle: RePEc:cbu:jrnlec:y:2015:v:6:p:186-192
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    References listed on IDEAS

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    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    2. Avouyi-Dovi, S. & Matheron, J., 2003. "Interactions between business cycles, stock market cycles and interest rates: the stylised facts," Financial Stability Review, Banque de France, issue 3, pages 80-99, November.
    3. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
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    Cited by:

    1. Mitra Lal Devkota, 2018. "The Dynamic Causality Between Stock Prices And Macroeconomic Variables: Evidence From Nepal," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 5-14, December.

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