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Looking far in the past:Revisiting the growth-returns nexus with non-parametric tests

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  • Ekaterini Panopoulou

    () (Economics, National University of Ireland, Maynooth)

  • N. Pittis
  • S. Kalyvitis

Abstract

In this paper we reexamine the linkages between output growth and real stock price changes for the G7 countries using a battery of non-parametric procedures to account for the impact of long-lagged observations. We find that correlation between growth and returns is detected at larger horizons than those typically employed in parametric studies. The major feedbacks emerge from stock price changes to growth within the first 6 to 12 months, but we show that significant feedbacks may last for up to two or three years. Our evidence also suggests that the correlation patterns differ substantially between the countries at hand when the sectoral share indices are considered.

Suggested Citation

  • Ekaterini Panopoulou & N. Pittis & S. Kalyvitis, 2006. "Looking far in the past:Revisiting the growth-returns nexus with non-parametric tests," Economics, Finance and Accounting Department Working Paper Series n1660306, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    • Handle: RePEc:may:mayecw:n1660306
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    Citations

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    Cited by:

    1. Ekaterini Panopoulou, 2006. "The predictive content of financial variables: Evidence from the euro area," The Institute for International Integration Studies Discussion Paper Series iiisdp178, IIIS.
    2. Ekaterini Panopoulou & Nikitas Pittis & Sarantis Kalyvitis, 2010. "Looking far in the past: revisiting the growth-returns nexus with non-parametric tests," Empirical Economics, Springer, vol. 38(3), pages 743-766, June.
    3. Panopoulou, Ekaterini, 2009. "Financial variables and euro area growth: A non-parametric causality analysis," Economic Modelling, Elsevier, vol. 26(6), pages 1414-1419, November.
    4. Lyócsa, Štefan, 2014. "Growth-returns nexus: Evidence from three Central and Eastern European countries," Economic Modelling, Elsevier, vol. 42(C), pages 343-355.
    5. Eduard Baum??hl & ??tefan Ly??csa, 2014. "How smooth is the stock market integration of CEE-3?," William Davidson Institute Working Papers Series wp1079, William Davidson Institute at the University of Michigan.
    6. Lyócsa, Štefan & Baumöhl, Eduard & Výrost, Tomáš, 2012. "Stock returns and real activity: the dynamic conditional lagged correlation approach," MPRA Paper 43307, University Library of Munich, Germany.
    7. Lyócsa, Štefan & Výrost, Tomáš & Baumöhl, Eduard, 2012. "Breakdowns and revivals: the long-run relationship between the stock market and real economic activity in the G-7 countries," MPRA Paper 43306, University Library of Munich, Germany.

    More about this item

    Keywords

    real stock price changes; output growth; long-run covariance matrix;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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