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An empirical investigation of the relationship between the real economy and stock returns for the United States

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  • Gregoriou, Andros
  • Hunter, John
  • Wu, Feng

Abstract

US asset prices are modelled in the short- and long-run with the use of a seemingly unrelated system using monthly data over the time period, 1983-2004. Once the shocks of 1987, 1997 and post-"9·11" have been accounted for, then volatility only affects the consumption and inflation equations. In the long run excess returns and inflation are driven by consumption growth. Money growth impacts excess returns and inflation via consumption. Income is super exogenous implying that policy can be made conditional on this variable and that in the long run investors are primarily concerned with income growth.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 31 (2009)
Issue (Month): 1 ()
Pages: 133-143

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Handle: RePEc:eee:jpolmo:v:31:y:2009:i:1:p:133-143

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Web page: http://www.elsevier.com/locate/inca/505735

Related research

Keywords: ARCH Excess returns Exogeneity Long-run returns SURE;

References

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Citations

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Cited by:
  1. Guglielmo Maria Caporale & John Hunter & Faek Menla Ali, 2013. "On the Linkages between Stock Prices and Exchange Rates: Evidence from the Banking Crisis of 2007-2010," CESifo Working Paper Series 4189, CESifo Group Munich.
  2. Majumder, Debasish, 2013. "Towards an efficient stock market: Empirical evidence from the Indian market," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 572-587.
  3. Jouini, Jamel, 2013. "Return and volatility interaction between oil prices and stock markets in Saudi Arabia," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 1124-1144.

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