The stock market and investment in the small and open Norwegian economy
Abstract
The relationship between the stock market and investment is analyzed by utilizing a multivariate vector autoregressive model, which also includes fundamentals represented by production and the bank interest rate. Two important results appear on the basis of data from the small, open economy of Norway. The financial market has no lead effect on real activity, as neither the stock market nor the credit market can predict future investment or production. On the contrary, current stock returns correlate negatively with lagged growth in investment, and positively with current growth in production. In addition, changes in the bank interest rate have a positive effect on future stock returns, production leads investment positively, and both production and the bank interest rate become exogenous variables in our model.Download Info
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Bibliographic Info
Article provided by Springer in its journal Empirical Economics.
Volume (Year): 26 (2001)
Issue (Month): 3 ()
Pages: 565-580
Note: received: November 1997/Final version received: October 2000
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Related research
Keywords: Stock market; investment; fundamentals;References
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Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Johann Burgstaller, 2002. "Are stock returns a leading indicator for real macroeconomic developments?," Economics working papers 2002-07, Department of Economics, Johannes Kepler University Linz, Austria.
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