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Output and stock prices: New evidence from the robust wavelet approach

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  • Tiwari, Aviral Kumar
  • Bhattacharyya, Malay
  • Das, Debojyoti
  • Shahbaz, Muhammad

Abstract

This article introduces a new dimension to the relationship between economic growth and stock prices in time-frequency domain for a period spanning over 215 years. The bidirectional causalities between the two variables of interest are captured in time-frequency domain using wavelet-based transformation technique without spectral matrix factorization. We find the evidences of: (a) stronger causal effect from GDP to stock prices than otherwise and (b) the intensity of negative shocks in GDP to stock prices to be more severe than positive shocks. In addition, we also find significant interaction between the variables in the longer run.

Suggested Citation

  • Tiwari, Aviral Kumar & Bhattacharyya, Malay & Das, Debojyoti & Shahbaz, Muhammad, 2018. "Output and stock prices: New evidence from the robust wavelet approach," Finance Research Letters, Elsevier, vol. 27(C), pages 154-160.
    • Handle: RePEc:eee:finlet:v:27:y:2018:i:c:p:154-160
    DOI: 10.1016/j.frl.2018.02.005
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    Cited by:

    1. Abdulnasser Hatemi-J, 2020. "Bear Markets and Recessions versus Bull Markets and Expansions," Papers 2009.01343, arXiv.org, revised Nov 2020.
    2. Debojyoti Das & Anupam Dutta & Rabin K. Jana & Indranil Ghosh, 2023. "The asymmetric impact of oil price uncertainty on emerging market financial stress: A quantile regression approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4299-4323, October.
    3. Debojyoti Das & M Kannadhasan & Malay Bhattacharyya, 2020. "Oil price shocks and emerging stock markets revisited," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(6), pages 1583-1614, December.
    4. Das, Debojyoti & Maitra, Debasish & Dutta, Anupam & Basu, Sankarshan, 2022. "Financial stress and crude oil implied volatility: New evidence from continuous wavelet transformation framework," Energy Economics, Elsevier, vol. 115(C).
    5. Erdost Torun & Afife Duygu Ayhan Akdeniz & Erhan Demireli & Simon Grima, 2022. "Long-Term US Economic Growth and the Carbon Dioxide Emissions Nexus: A Wavelet-Based Approach," Sustainability, MDPI, vol. 14(17), pages 1-16, August.

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