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Stocks and GDP in the long run

Author

Listed:
  • Alexius, Annika

    (Dept. of Economics, Stockholm University)

  • Spång, Daniel

    (The Fourth Swedish National Pension Fund)

Abstract

Previous studies have documented long run equilibrium relationships between e.g. stock prices and labour income or dividends and consumption. In general equilibrium, output, consumption, labour income, stock prices, and dividends are endogenous variables that are determined by the same stochastic productivity trend. We show that stock prices are cointegrated with domestic and foreign output in the G7 countries, which arguably is a more fundamental relationship than the connection between consumtion and dividends.

Suggested Citation

  • Alexius, Annika & Spång, Daniel, 2015. "Stocks and GDP in the long run," Research Papers in Economics 2015:5, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2015_0005
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    File URL: http://www2.ne.su.se/paper/wp15_05.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Stock prices; GDP; Long run risks; Cointegration;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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