Stock returns and economic activity in nature and emerging countries
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Subject
Rate of return ; Stocks -- Prices ; Stock price forecasting -- Econometric models ; Investment analysisAbstract
This paper empirically investigates the potential existence and strength of unidirectional
or bi-directional relations stemming from the aspects of economic activity
to stock returns and those that are produced from the opposite direction both in mature
and emerging countries. We applied a multivariate VAR model and we performed
Granger causality tests. Both quarterly and monthly (availability concerning) data
were used, covering the period January 1980-December 2012. The economic activity
was presented through a variety of variables such as GDP growth, industrial
production growth, government consumption, private consumption, market value
growth and inflation. The existence of an empirical relationship with forecasting
extensions is confirmed in some economic activity presenting variables, but the
magnitude of the results is differentiated between mature and emerging countries.