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Time-varying causal relationship between stock market and unemployment in the United Kingdom: Historical evidence from 1855 to 2017

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  • Sibande, Xolani
  • Gupta, Rangan
  • Wohar, Mark E.

Abstract

The influence of financial markets on the real economy, including that of stock market returns on unemployment, is a key focus in the literature. Using DCC-MGARCH tests, we analyse time-varying causality between stock market returns and unemployment in the UK using monthly data from 1855 to 2017. The tests reveal that there is significant evidence of information spillover between the stock market and the labour market. This information spillover was found to be significant in the direction of stock market returns to unemployment, insignificant in the opposite direction, and significant bi-directionally. The results were also found to be congruent to the macroeconomic history of the UK.

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  • Sibande, Xolani & Gupta, Rangan & Wohar, Mark E., 2019. "Time-varying causal relationship between stock market and unemployment in the United Kingdom: Historical evidence from 1855 to 2017," Journal of Multinational Financial Management, Elsevier, vol. 49(C), pages 81-88.
    • Handle: RePEc:eee:mulfin:v:49:y:2019:i:c:p:81-88
    DOI: 10.1016/j.mulfin.2019.02.003
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    Cited by:

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    4. Caporin, Massimiliano & Costola, Michele, 2022. "Time-varying Granger causality tests in the energy markets: A study on the DCC-MGARCH Hong test," Energy Economics, Elsevier, vol. 111(C).

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    More about this item

    Keywords

    Time-varying Granger causality; Stock market returns; Unemployment;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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