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Stock market and aggregate economic activity: evidence from Australia

  • K. Chaudhuri
  • S. Smiles

Using the multivariate cointegration methodology, this article documents the evidence of long-run relationships between real stock price and measures of aggregate real activity including real GDP, real private consumption, real money and the real price of oil in the Australian market. Real stock return in Australia is related to temporary departures from the long-run relationship and to changes in real macroeconomic activity. The results also document that the information provided by the cointegration contain some additional information that is not already present in other sources of return variation such as term spread, future GDP growth or shocks to term spread. On the other hand, the influence of other markets, especially stock return variation in the US and New Zealand markets, significantly affects Australian stock return movements.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0960310042000176399
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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 2 ()
Pages: 121-129

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Handle: RePEc:taf:apfiec:v:14:y:2004:i:2:p:121-129
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