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Productivity and equity market fundamentals: 80 years of evidence for 11 OECD countries

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  • Davis, E. Philip
  • Madsen, Jakob B.

Abstract

The share market boom in the 1990s is often linked to the acceleration in labour and total factor productivities over the same period. This paper explores the argument that labour and total factor productivities are inaccurate measures of firm's earnings, which underlie equity valuations, and that capital productivity is a better measure of earnings. Using 80 years of data for 11 OECD countries, it is shown empirically that the link of capital productivity to share returns is indeed stronger than that of labour productivity and TFP.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 27 (2008)
Issue (Month): 8 (December)
Pages: 1261-1283

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Handle: RePEc:eee:jimfin:v:27:y:2008:i:8:p:1261-1283

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Productivity Share returns;

References

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Cited by:
  1. Narayan, Paresh Kumar & Thuraisamy, Kannan S., 2013. "Common trends and common cycles in stock markets," Economic Modelling, Elsevier, vol. 35(C), pages 472-476.
  2. Madsen, Jakob B., 2009. "Taxes and the fundamental value of houses," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 365-376, May.

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