Are stock returns a leading indicator for real macroeconomic developments?
I examine whether or not returns on stock markets are a leading indicator for real macroeconomic developments in Austria, Japan and the USA. Further I deal with the concept of stock market efficiency, the question whether or not information from real and financial sectors of the economy is consistently priced on stock markets. This would not be the case if past macroeconomic developments could be used to improve forecasts of subsequent stock returns. Time series models are used to investigate the respective long-run relations between stock prices and other macroeconomic variables as well as short-term dynamics. I conclude that none of the markets under study is efficient in the above-mentioned strict sense. Only U.S. stock returns lead private consumption and, rather weakly, retail sales growth.
|Date of creation:||Jul 2002|
|Date of revision:|
|Contact details of provider:|| Fax: +43 732-2468-8238|
Web page: http://www.econ.jku.at/
More information through EDIRC
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.:
- Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
- Pagano, Marco & Panetta, Fabio & Zingales, Luigi, 1996. "The stock market as a source of capital: Some lessons from initial public offerings in Italy," European Economic Review, Elsevier, vol. 40(3-5), pages 1057-1069, April.
- Olivier Blanchard & Changyong Rhee & Lawrence Summers, 1990.
"The Stock Market, Profit and Investment,"
NBER Working Papers
3370, National Bureau of Economic Research, Inc.
- James H. Stock & Mark W. Watson, 1998.
"Business Cycle Fluctuations in U.S. Macroeconomic Time Series,"
NBER Working Papers
6528, National Bureau of Economic Research, Inc.
- Stock, James H. & Watson, Mark W., 1999. "Business cycle fluctuations in us macroeconomic time series," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 1, pages 3-64 Elsevier.
- Gjerde, Oystein & Saettem, Frode, 1999. "Causal relations among stock returns and macroeconomic variables in a small, open economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(1), pages 61-74, January.
- Owen A. Lamont, 2000.
"Investment Plans and Stock Returns,"
Journal of Finance,
American Finance Association, vol. 55(6), pages 2719-2745, December.
- 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.
- Maysami, Ramin Cooper & Koh, Tiong Sim, 2000. "A vector error correction model of the Singapore stock market," International Review of Economics & Finance, Elsevier, vol. 9(1), pages 79-96, February.
- Lamin Y Leigh, 1997. "Stock Market Equilibrium and Macroeconomic Fundamentals," IMF Working Papers 97/15, International Monetary Fund.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
- Jurgen A. Doornik & David F. Hendry & Bent Nielsen, 1998.
"Inference in Cointegrating Models: UK M1 Revisited,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 12(5), pages 533-572, December.
- Doornik, Jurgen A & Hendry, David F & Nielsen, Bent, 1998. " Inference in Cointegrating Models: UK M1 Revisited," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 533-72, December.
- Poterba, J.M. & Samwick, A.A., 1996.
"Stock Ownership Patterns, Stock Market Fluctuations, and Consumption,"
96-2, Massachusetts Institute of Technology (MIT), Department of Economics.
- James M. Poterba & Andrew A. Samwick, 1995. "Stock Ownership Patterns, Stock Market Fluctuations, and Consumption," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 295-372.
- Barro, Robert J, 1990.
"The Stock Market and Investment,"
Review of Financial Studies,
Society for Financial Studies, vol. 3(1), pages 115-31.
- Robert B. Barsky & J. Bradford De Long, 1992.
"Why Does the Stock Market Fluctuate?,"
NBER Working Papers
3995, National Bureau of Economic Research, Inc.
- Stephen R. Bond & Jason G. Cummins, 2000. "The Stock Market and Investment in the New Economy: Some Tangible Facts and Intangible Fictions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 61-124.
- Martha Starr-McCluer, 1998.
"Stock market wealth and consumer spending,"
Finance and Economics Discussion Series
1998-20, Board of Governors of the Federal Reserve System (U.S.).
- Simon Gilchrist & Ben S. Bernanke & Mark Gertler, 1994.
"The financial accelerator and the flight to quality,"
Finance and Economics Discussion Series
94-18, Board of Governors of the Federal Reserve System (U.S.).
- Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
- Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1994. "The Financial Accelerator and the Flight to Quality," Working Papers 94-24, C.V. Starr Center for Applied Economics, New York University.
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc.
- Maria Ward Otoo, 1999. "Consumer sentiment and the stock market," Finance and Economics Discussion Series 1999-60, Board of Governors of the Federal Reserve System (U.S.).
- Runkle, David E, 1987. "Vector Autoregressions and Reality," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 437-42, October.
- Randall Morck & Andrei Shleifer & Robert W. Vishny, 1990. "The Stock Market and Investment: Is the Market a Sideshow?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 157-216.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- Cheung, Yin-Wong & Ng, Lilian K., 1998. "International evidence on the stock market and aggregate economic activity," Journal of Empirical Finance, Elsevier, vol. 5(3), pages 281-296, September.
- Karen E. Dynan & Dean M. Maki, 2001. "Does stock market wealth matter for consumption?," Finance and Economics Discussion Series 2001-23, Board of Governors of the Federal Reserve System (U.S.).
- David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
- Laurence Boone & Claude Giorno & Pete Richardson, 1998. "Stock Market Fluctuations and Consumption Behaviour: Some Recent Evidence," OECD Economics Department Working Papers 208, OECD Publishing.
- Granger, Clive W.J. & Huang, Bwo-Nung & Yang, Chin W., 1998.
"A Bivariate Causality between Stock Prices and Exchange Rates: Evidence from Recent Asia Flu,"
University of California at San Diego, Economics Working Paper Series
qt9bk607p6, Department of Economics, UC San Diego.
- Granger, Clive W. J. & Huangb, Bwo-Nung & Yang, Chin-Wei, 2000. "A bivariate causality between stock prices and exchange rates: evidence from recent Asianflu," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(3), pages 337-354.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, December.
- Øystein Gjerde & Kjell Henry Knivsflå & Frode Sættem, 2001. "The stock market and investment in the small and open Norwegian economy," Empirical Economics, Springer, vol. 26(3), pages 565-580.
When requesting a correction, please mention this item's handle: RePEc:jku:econwp:2002_07. 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: (René Böheim)
If references are entirely missing, you can add them using this form.