Stock Prices and Economic Growth: Are They Related?

Authors

Peter J. Saunders, Central Washington UniversityFollow
Koushik Ghosh, Central Washington UniversityFollow

Department or Administrative Unit

Economics

Document Type

Article

Publication Date

2007

Journal

Indian Journal of Economics & Business

Abstract

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.

Comments

This article was originally published in the Indian Journal of Economics & Business.

Recommended Citation

Saunders, P. J. & Ghosh, K. (2007). Stock Prices and Economic Growth: Are They Related? Indian Journal of Economics and Business, special issue, 67-79.