Stock Returns and Real Activity: A Century of Evidence
AbstractThis paper analyzes the relation between real stock returns and real activity from 1889-1988. It replicates Fama's (1990) results for the 1953-87 period using an additional 65 years of data. It also compares two measures of industrial production in the tests: (1) the series produced by Babson for 1889-1918, spliced with the Federal Reserve Board index of industrial production for 1919-1988, and (2) the new Miron and Romer (1989) index spliced with the Fed index in 1941. Fama's findings are robust for a much longer period -- future production growth rates explain a large fraction of the variation in stock returns. The new Miron-Romer measure of industrial production is less closely related to stock price movements than the older Babson and Federal Reserve Board measures.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3296.
Date of creation: Mar 1990
Date of revision:
Publication status: published as The Journal of Finance, Vol. XLV, No. 4, pp. 1237-1257, (September 1990).
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Other versions of this item:
- Schwert, G William, 1990. " Stock Returns and Real Activity: A Century of Evidence," Journal of Finance, American Finance Association, vol. 45(4), pages 1237-57, September.
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- Miron, Jeffrey A. & Romer, Christina D., 1990.
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- John Y. Campbell, Robert J. Shiller, 1988. "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," Review of Financial Studies, Society for Financial Studies, vol. 1(3), pages 195-228.
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