On Fiscal Policy and the Stock Market
AbstractThis paper provides some empirical evidence on the relationship between aggregate quarterly stock prices and other macro variables, including measures of monetary and fiscal policy in Canada. The results indicate the presence of significant lags in the reaction of stock prices to fiscal policy moves. To the extent that a proxy for the fiscal policy effect on required (expected) return to capital was included in the model, such a finding conflicts with the stock market efficiency hypothesis. Further tests also suggest that anticipated and unanticipated fiscal policy changes have significant lagged relationships with current stock prices. The Canadian stock market, therefore, appears to have been inefficient with respect to available information on fiscal policy. Copyright 1988 by Ohio State University Press.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 20 (1988)
Issue (Month): 3 (August)
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- Luca Agnello & Vítor Castro & Ricardo M. Sousa, 2011.
"How Does Fiscal Policy React to Wealth Composition and Asset Prices?,"
NIPE Working Papers
24/2011, NIPE - Universidade do Minho.
- Agnello, Luca & Castro, Vítor & Sousa, Ricardo M., 2012. "How does fiscal policy react to wealth composition and asset prices?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 874-890.
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- Laopodis, Nikiforos T., 2009. "Fiscal policy and stock market efficiency: Evidence for the United States," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 633-650, May.
- Luca Agnello & Gilles Dufrénot & Ricardo M. Sousa, 2012. "Adjusting the U.S. Fiscal Policy for Asset Prices: Evidence from a TVP-MS Framework," NIPE Working Papers 20/2012, NIPE - Universidade do Minho.
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- Afonso, António & Sousa, Ricardo M., 2011. "What are the effects of fiscal policy on asset markets?," Economic Modelling, Elsevier, vol. 28(4), pages 1871-1890, July.
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