Stock Returns and Real Activity: A Century of Evidence
This paper analyzes the relation between real stock returns and real activity from 1889 to 1988. It replicates Eugene F. Fama's (1990) results for the 1953-87 period using an additional sixty-five 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 1919-88, and (2) the new Miron and Romer (1989) index spliced with the Federal Reserve Board 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. Copyright 1990 by American Finance Association.
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Volume (Year): 45 (1990)
Issue (Month): 4 (September)
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References listed on IDEAS
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- Kaul, Gautam, 1987. "Stock returns and inflation : The role of the monetary sector," Journal of Financial Economics, Elsevier, vol. 18(2), pages 253-276, June.
- French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
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