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Looking far in the past: Revisiting the growth-returns nexus with non-parametric tests

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  • Ekaterini Panopoulou
  • Nikitas Pittis
  • Sarantis Kalyvitis

Abstract

In this paper we reexamine the linkages between output growth and real stock price changes for the G7 countries using a battery of non-parametric procedures to account for the impact of long-lagged observations. We find that correlation between growth and returns is detected at larger horizons than those typically employed in parametric studies. The major feedbacks emerge from stock price changes to growth within the first 6 to 12 months, but we show that significant feedbacks may last for up to two or three years. Our evidence also suggests that the correlation patterns differ substantially between the countries at hand when the sectoral share indices are considered.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp134.

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Date of creation: 23 May 2006
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Handle: RePEc:iis:dispap:iiisdp134

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Keywords: real stock price changes; output growth; long-run covariance matrix;

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Citations

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Cited by:
  1. Ekaterini Panopoulou & Nikitas Pittis & Sarantis Kalyvitis, 2010. "Looking far in the past: revisiting the growth-returns nexus with non-parametric tests," Empirical Economics, Springer, vol. 38(3), pages 743-766, June.
  2. Ekaterini Panopoulou, 2006. "The predictive content of financial variables: Evidence from the euro area," The Institute for International Integration Studies Discussion Paper Series iiisdp178, IIIS.
  3. Lyócsa, Štefan & Baumöhl, Eduard & Výrost, Tomáš, 2012. "Stock returns and real activity: the dynamic conditional lagged correlation approach," MPRA Paper 43307, University Library of Munich, Germany.
  4. Lyócsa, Štefan & Výrost, Tomáš & Baumöhl, Eduard, 2012. "Breakdowns and revivals: the long-run relationship between the stock market and real economic activity in the G-7 countries," MPRA Paper 43306, University Library of Munich, Germany.
  5. Panopoulou, Ekaterini, 2009. "Financial variables and euro area growth: A non-parametric causality analysis," Economic Modelling, Elsevier, vol. 26(6), pages 1414-1419, November.

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