Articlegreen1990

Stock Returns and Real Activity: A Century of Evidence

733 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Monetary Policy and Economic Impact Market Dynamics and Volatility

Abstract

ABSTRACT This paper analyzes the relation between real stock returns and real activity from 1889–1988. It replicates Fama's (1990) results for the 1953–1987 period using an additional 65 years of data. It also compares two measures of industrial production in the tests: (1) the series produced by Babson for 1889–1918, spliced with the Federal Reserve Board index of industrial production for 1919–1988, and (2) the new Miron and Romer (1989) index spliced with the Federal Reserve Board index in 1941. Fama's findings are robust for a much longer period—future production growth rates explain a large fraction of the variation in stock returns. The new Miron‐Romer measure of industrial production is less closely related to stock price movements than the older Babson and Federal Reserve Board measures.

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References

1987Expected stock returns and volatility 1989Business conditions and expected returns on stocks and bonds 1988The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors 1989Why Does Stock Market Volatility Change Over Time?1981Stock Returns, Real Activity, Inflation, and Money 1986The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors 1990Stock Returns, Expected Returns, and Real Activity 1983The Fiscal and Monetary Linkage Between Stock Returns and Inflation

Cited by

1993Stock Prices, News, and Business Conditions 2000Firm Size and Cyclical Variations in Stock Returns 1993Predictable Stock Returns: The Role of Small Sample Bias 2002Stock return predictability and model uncertainty 1998Volatility and cross correlation across major stock markets 2005The use of data mining and neural networks for forecasting stock market returns 2005

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