Stock returns and economic activity in mature and emerging markets
This paper empirically investigates the dynamic interdependencies between stock returns and economic activity in mature and emerging markets. The existence, kind and strength of potential uni-directional and/or bi-directional relations are examined, running from stock returns to future economic activity and/or from economic activity to future stock returns. A bivariate VAR(12) model is applied and Granger causality tests are performed. Monthly data covering the January 1991-December 2006 period are used. The existence of an empirical relationship, with forecasting ability, between stock returns and future economic activity is confirmed. The results are strongly differentiated between mature and emerging markets.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blanchard, Olivier J, 1981. "Output, the Stock Market, and Interest Rates," American Economic Review, American Economic Association, vol. 71(1), pages 132-43, March.
- Asprem, Mads, 1989. "Stock prices, asset portfolios and macroeconomic variables in ten European countries," Journal of Banking & Finance, Elsevier, vol. 13(4-5), pages 589-612, September.
- Torsten SlÃ¸k & Peter F. Christoffersen, 2000. "Do Asset Prices in Transition Countries Contain Information About Future Economic Activity?," IMF Working Papers 00/103, International Monetary Fund.
- 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.
- G. William Schwert, 1990. "Stock Returns and Real Activity: A Century of Evidence," NBER Working Papers 3296, National Bureau of Economic Research, Inc.
- Balvers, Ronald J & Cosimano, Thomas F & McDonald, Bill, 1990. " Predicting Stock Returns in an Efficient Market," Journal of Finance, American Finance Association, vol. 45(4), pages 1109-28, September.
- Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-65, September.
- Paolo Mauro, 2000. "Stock Returns and Output Growth in Emerging and Advanced Economies," IMF Working Papers 00/89, International Monetary Fund.
- Barro, Robert J, 1990.
"The Stock Market and Investment,"
Review of Financial Studies,
Society for Financial Studies, vol. 3(1), pages 115-31.
- 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.
- 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.
- Hamilton, James D & Gang, Lin, 1996. "Stock Market Volatility and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 573-93, Sept.-Oct.
- Jean-Marie Dufour & David Tessier, 2006. "Short-Run and Long-Run Causality between Monetary Policy Variables and Stock Prices," Working Papers 06-39, Bank of Canada.
- Canova, Fabio & De Nicolo', Gianni, 1995. "Stock returns and real activity: A structural approach," European Economic Review, Elsevier, vol. 39(5), pages 981-1015, May.
- Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
- Lee, Bong-Soo, 1992. " Causal Relations among Stock Returns, Interest Rates, Real Activity, and Inflation," Journal of Finance, American Finance Association, vol. 47(4), pages 1591-603, September.
- Binswanger, Mathias, 2000. "Stock market booms and real economic activity: Is this time different?," International Review of Economics & Finance, Elsevier, vol. 9(4), pages 387-415, October.
- McQueen, Grant & Roley, V Vance, 1993. "Stock Prices, News, and Business Conditions," Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 683-707.
- Fabio Canova & Gianni de Nicolo, 1997.
"Stock returns, term structure, inflation and real activity: An international perspective,"
Economics Working Papers
203, Department of Economics and Business, Universitat Pompeu Fabra.
- Canova, Fabio & Nicol , Gianni De, 2000. "Stock Returns, Term Structure, Inflation, And Real Activity: An International Perspective," Macroeconomic Dynamics, Cambridge University Press, vol. 4(03), pages 343-372, September.
- Canova, Fabio & de Nicolò, Gianni, 1997. "Stock Returns, Term Structure, Inflation and Real Activity: An International Perspective," CEPR Discussion Papers 1614, C.E.P.R. Discussion Papers.
- Nicolaas Groenewold, 2004. "Fundamental share prices and aggregate real output," Applied Financial Economics, Taylor & Francis Journals, vol. 14(9), pages 651-661.
- Barry Bosworth, 1975. "The Stock Market and the Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 527-300.
- Hassapis, Christis & Kalyvitis, Sarantis, 2002. "Investigating the links between growth and real stock price changes with empirical evidence from the G-7 economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(3), pages 543-575.
- Gallinger, George W, 1994. "Causality Tests of the Real Stock Return-Real Activity Hypothesis," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(2), pages 271-88, Summer.
- Jay Choi, Jongmoo & Hauser, Shmuel & Kopecky, Kenneth J., 1999. "Does the stock market predict real activity? Time series evidence from the G-7 countries," Journal of Banking & Finance, Elsevier, vol. 23(12), pages 1771-1792, December.
When requesting a correction, please mention this item's handle: RePEc:eee:quaeco:v:49:y:2009:i:2:p:668-685. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.