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Stock returns and real activity: the dynamic conditional lagged correlation approach

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  • Lyócsa, Štefan
  • Baumöhl, Eduard
  • Výrost, Tomáš

Abstract

Using dynamic conditional correlations (DCCs), we estimate the time-varying relationship between stock market returns and output growth based on monthly data for the US over the 1964:01 to 2012:07 time period. We demonstrate that in general, this relationship is positive and present during the entire study period. Furthermore, our findings suggest that this relationship is strengthened during recessions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 43307.

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Date of creation: 17 Dec 2012
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Handle: RePEc:pra:mprapa:43307

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Keywords: stock market returns; real activity; dynamic conditional lagged correlations; recessions;

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  1. Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
  2. Ekaterini Panopoulou & Nikitas Pittis & Sarantis Kalyvitis, 2006. "Looking far in the past: Revisiting the growth-returns nexus with non-parametric tests," The Institute for International Integration Studies Discussion Paper Series iiisdp134, IIIS.
  3. Paolo Mauro, 2000. "Stock Returns and Output Growth in Emerging and Advanced Economies," IMF Working Papers 00/89, International Monetary Fund.
  4. Canova, Fabio & de Nicolo, Gianni, 1997. "Stock Returns, Term Structure, Inflation and Real Activity: An International Perspective," CEPR Discussion Papers 1614, C.E.P.R. Discussion Papers.
  5. Engle, Robert F & Sheppard, Kevin K, 2001. "Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH," University of California at San Diego, Economics Working Paper Series qt5s2218dp, Department of Economics, UC San Diego.
  6. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
  7. G. William Schwert, 1990. "Stock Returns and Real Activity: A Century of Evidence," NBER Working Papers 3296, National Bureau of Economic Research, Inc.
  8. Mathias Binswanger, 2000. "Stock returns and real activity: is there still a connection?," Applied Financial Economics, Taylor & Francis Journals, vol. 10(4), pages 379-387.
  9. Binswanger, Mathias, 2004. "Stock returns and real activity in the G-7 countries: did the relationship change during the 1980s?," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(2), pages 237-252, May.
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