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The Study of Correlation between Stock Market Dynamics and Real Economy

  • Carmen Maria Angyal

    ()

    (West University Timisoara Faculty of Economics and Business Administration)

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    The current financial crises have determined many economists considering the source and cause of its development being the decorrelation between financial flows and real economy. In this paper, using ARIMA methodology we decompose the trend component of a stock index and apply Johansen cointegration test in order to find the measure of cointegration between capital markets’ dynamics and economic growth. Our results show that most of the indices analyzed show no cointegration with economic growth. The study highlights one of the most important factors leading to the current financial and economic crisis, namely the decoupling of the financial sector from the real economy sector.

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    File URL: http://journals.univ-danubius.ro/index.php/euroeconomica/article/view/1260/1145
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    Article provided by Danubius University of Galati in its journal Euroeconomica.

    Volume (Year): (2012)
    Issue (Month): 2(31) (May)
    Pages: 14-22

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    Handle: RePEc:dug:journl:y:2012:i:2:p:14-22
    Contact details of provider: Web page: http://www.euroeconomica-danubius.ro/

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    1. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    2. Frederic Mishkin, 2005. "Is Financial Globalization Beneficial?," NBER Working Papers 11891, National Bureau of Economic Research, Inc.
    3. Graciela Kaminsky & Sergio Schmukler, 2003. "Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization," NBER Working Papers 9787, National Bureau of Economic Research, Inc.
    4. Maravall, Agustin, 2006. "An application of the TRAMO-SEATS automatic procedure; direct versus indirect adjustment," Computational Statistics & Data Analysis, Elsevier, vol. 50(9), pages 2167-2190, May.
    5. Poon, Ser-Huang & Taylor, Stephen J., 1992. "Stock returns and volatility: An empirical study of the UK stock market," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 37-59, February.
    6. Bell, William R & Hillmer, Steven C, 1984. "Issues Involved with the Seasonal Adjustment of Time Series: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 343-49, October.
    7. Bell, William R & Hillmer, Steven C, 1984. "Issues Involved with the Seasonal Adjustment of Economic Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 291-320, October.
    8. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
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