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Long-Run Relationship between Economic Growth and Stock Returns: An Empirical Investigation on Canada and the United States

  • Feridun, Mete

This article examines the long run relationship between economic growth and stock prices for Canada and the United States through cointegration estimation procedure, and it implements the Vector Error Correction Models (VECM) to abstract simultaneously the short- and long-run information in the modeling process. Results from the cointegration tests reveal that economic growth and stock prices share long run equilibrium relationship for both Canada and the U.S. The results from the VECM indicate that for the U.S., causality runs from economic growth to stock prices but not vice versa. However for Canada, the results reveal that there is a bi-directional causality between economic growth and stock prices.

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File URL: https://mpra.ub.uni-muenchen.de/737/1/MPRA_paper_737.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 737.

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Date of creation: Mar 2006
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Publication status: Published in Ekonomicky Casopis 6.54(2006): pp. 584-596
Handle: RePEc:pra:mprapa:737
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Web page: https://mpra.ub.uni-muenchen.de

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