Stock Prices and Economic Growth: Are They Related?
Department or Administrative Unit
This paper investigates the relationship between economic growth and stock prices in the U.S. Quarterly data on NASDAQ, DJIA, S&P 500 and real GDP ranging from the first quarter of 1971 to the fourth quarter of 2005 are analyzed. Cointegration test results indicate that while RGDP and S&P 500 are not cointegrated, RGDP and NASDAQ appear to be cointegrated. VEC analyses of the RGDP and NASDAQ data indicate that in the short-run, RGDP has a positive impact on stock prices. Further Granger causality testing of the data indicates that RGDP Granger -causes both changes in DJIA and S&P 500.
Saunders, Peter J. and Ghosh, Koushik, "Stock Prices and Economic Growth: Are They Related?" (2007). All Faculty Scholarship for the College of Business. 162.
Indian Journal of Economics & Business
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