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Stock market volatility, speculation and unemployment: A Granger-causality analysis

Author

Listed:
  • Bernardina Algieri

    (University of Calabria and Bonn University)

  • Emiliano Brancaccio

    (University of Sannio)

  • Damiano Buonaguidi

    (University of Florence Pisa and Siena and Italian Ministry of Economy)

Abstract

This study investigates the possible Granger-causal relations between stock price volatility and dividend dynamics on the one hand, and speculation and unemployment on the other. The analysis is carried out for the US over the period 1982-2018. Stock price volatility is calculated in terms of conditional volatility and in terms of the so-called 'Shiller ratio', while speculative trading is expressed as scalping activities. We find that there is a causal positive relation from speculation to stock price volatility. Furthermore, we show that there is an inverse causal relationship ranging from stock prices to unemployment, while there is no causal relationship between dividends and unemployment. These results corroborate the empirical analyses by Shiller and other authors which deny the traditional Present Value Model (PVM), provide new elements on the possible determinants of stock price volatility, and offer new interpretations of the potential links between the stock market and macroeconomic dynamics.

Suggested Citation

  • Bernardina Algieri & Emiliano Brancaccio & Damiano Buonaguidi, 2020. "Stock market volatility, speculation and unemployment: A Granger-causality analysis," PSL Quarterly Review, Economia civile, vol. 73(293), pages 137-160.
    • Handle: RePEc:psl:pslqrr:2020:23
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    File URL: https://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/16826/16131
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    References listed on IDEAS

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    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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