Publication details

A Tale of Tails: New Evidence on the Growth-Return Nexus

Authors

LYÓCSA Štefan VÝROST Tomáš PLÍHAL Tomáš

Year of publication 2021
Type Article in Periodical
Magazine / Source Finance Research Letters
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web https://www.sciencedirect.com/science/article/pii/S1544612319310347#!
Keywords Economic activity; Stock market; Quantile dependence; Cross-quantilogram; Term spread;
Description Existing theoretical models predict that asset prices should be strongly related to economic fundamentals. Yet empirical studies usually find a weak correlation. We find that the stock market declines tend to be followed by slower economic growth within two-to-four quarters. However, the relationship is not linear as it tends to be weaker when market prices increase. This result holds for most of 20, mostly developed, countries in our sample. Controlling for the development in interest rates does not change our conclusions. Therefore, we provide new evidence that economic fundamentals and stock prices are related in quantiles.

You are running an old browser version. We recommend updating your browser to its latest version.

More info