This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Do Stock Market Returns Predict Changes to Output? Evidence from a Nonlinear Panel Data Model

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Ólan T. Henry
Nilss Olekalns
Jonathan Thong

Additional information is available for the following registered author(s):

Abstract

Recent empirical work suggests a predictive relationship between stock returns and output growth. We employ quarterly data from a panel of 27 countries to test whether stock returns as useful in predicting growth. Unlike previous research, our approach allows for the possible non-linear effect of recessions on the growth-return relationship. There is strong evidence to suggest that a linear model would be misspecified and provide potentially misleading inference. Using a switching regression approach, we find evidence that returns are most useful in predicting growth when the economy is in recession.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.economics.unimelb.edu.au/SITE/research/workingpapers/wp03/868.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 868.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 25 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:mlb:wpaper:868

Contact details of provider:
Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
Phone: +61 3 8344 5289
Fax: +61 3 8344 6899
Email:
Web page: http://www.economics.unimelb.edu.au
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Colemann Leong).

Related research
Keywords: Panel data; current depth of recession; stock returns;

Other versions of this item:

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Stanley Fischer & Robert C. Merton, 1985. "Macroeconomics and Finance: The Role of the Stock Market," NBER Working Papers 1291, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Mohsin S. Khan & A. Senhadji Semlali, . "Financial Development and Economic Growth: An Overview," IMF Working Papers 00/209, International Monetary Fund.
  3. Mullins, Mark & Wadhwani, Sushil B., 1989. "The effect of the stock market on investment: a comparative study," European Economic Review, Elsevier, vol. 33(5), pages 939-956, May. [Downloadable!] (restricted)
  4. Geske, Robert & Roll, Richard, 1983. " The Fiscal and Monetary Linkage between Stock Returns and Inflation," Journal of Finance, American Finance Association, vol. 38(1), pages 1-33, March. [Downloadable!] (restricted)
  5. Prakash Loungani & Mark Rush & William Tave, 1991. "Stock market dispersion and business cycles," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jan, pages 2-8. [Downloadable!]
  6. Bradley, Michael D & Jansen, Dennis W, 1997. "Nonlinear Business Cycle Dynamics: Cross-country Evidence on the Persistence of Aggregate Shocks," Economic Inquiry, Oxford University Press, vol. 35(3), pages 495-509, July.
  7. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September. [Downloadable!] (restricted)
  8. G. William Schwert, 1990. "Stock Returns and Real Activity: A Century of Evidence," NBER Working Papers 3296, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Benjamin M. Friedman & Kenneth N. Kuttner, 1991. "Why does the paper-bill spread predict real economic activity?," Working Paper Series, Macroeconomic Issues 91-16, Federal Reserve Bank of Chicago.
    Other versions:
  10. Bruce E. Hansen, 1997. "Threshold effects in non-dynamic panels: Estimation, testing and inference," Boston College Working Papers in Economics 365, Boston College Department of Economics. [Downloadable!]
    Other versions:
  11. Anil K Kashyap & Jeremy C. Stein & David W. Wilcox, 1992. "Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance," NBER Working Papers 4015, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1990. "The Stock Market and Investment: Is the Market a Sideshow?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990-2), pages 157-216. [Downloadable!]
  13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  14. Binswanger, Mathias, 2000. "Stock Returns and Real Activity: Is There Still a Connection?," Applied Financial Economics, Taylor and Francis Journals, vol. 10(4), pages 379-87, August. [Downloadable!] (restricted)
  15. Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-65, September. [Downloadable!] (restricted)
  16. Zuliu Hu, 1993. "The Yield Curve and Real Activity," IMF Working Papers 93/19, International Monetary Fund.
  17. Paolo Mauro, 2000. "Stock Returns and Output Growth in Emerging and Advanced Economies," IMF Working Papers 00/89, International Monetary Fund.
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lennard van Gelder & Ad Stokman, 2006. "Regime transplants in GDP growth forecasting: A recipe for better predictions?," DNB Working Papers 106, Netherlands Central Bank, Research Department. [Downloadable!]
  2. Boyan Jovanovic, 2007. "Investment Options and the Business Cycle," NBER Working Papers 13307, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
Statistics
Access and download statistics

Did you know? There are NEP reports in over 80 fields that deliver new research to your email.

This page was last updated on 2009-11-23.


This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.