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Interactions between Business Cycles, stock Market Cycles and Interest Rates: the Stylised Facts

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  • Avouyi-Dovi, S.
  • Matheron, J.

Abstract

In this paper, we study the co-movements between stock market indices and real economic activity over the business cycle in France, Germany, Italy, the United Kingdom and the United States, using two complementary approaches in our analysis. First, we identify the turning points in real economy indicators and stock market indices and determine the extent to which these series co-move. Second, we calculate the correlations between the cyclical components of real economy indicators and excess returns, on the one hand, and the correlations between the structural components and these indicators, on the other. We then analyse the co-movements between three-month interest rates and the cyclical and structural components of the real economy and stock market indices.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 121.

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Length: 36 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:bfr:banfra:121

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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Keywords: Stock returns ; Comovements ; Turning points ; Spectral analysis.;

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References

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  1. Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band pass filter," Working Paper 9906, Federal Reserve Bank of Cleveland.
    • Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
  2. James B. Bullard & Eric Schaling, 2002. "Why the Fed should ignore the stock market," Review, Federal Reserve Bank of St. Louis, issue Mar., pages 35-42.
  3. Paul Cashin & C John McDermott & Alasdair Scott, 1999. "The myth of co-moving commodity prices," Reserve Bank of New Zealand Discussion Paper Series G99/9, Reserve Bank of New Zealand.
  4. Christophe Croux & Mario Forni & Lucrezia Reichlin, 2001. "A Measure Of Comovement For Economic Variables: Theory And Empirics," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 232-241, May.
  5. Artis, Michael J & Marcellino, Massimiliano & Proietti, Tommaso, 2003. "Dating the Euro Area Business Cycle," CEPR Discussion Papers 3696, C.E.P.R. Discussion Papers.
  6. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
  7. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, May.
  8. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
  9. Don Harding & Adrian Pagan, 2000. "Disecting the Cycle: A Methodological Investigation," Econometric Society World Congress 2000 Contributed Papers 1164, Econometric Society.
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Cited by:
  1. Kierzenkowski, R. & Oung, V., 2007. "L’évolution des crédits à l’habitat en France : une grille d’analyse en termes de cycles," Working papers 172, Banque de France.

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