Economic Growth Risk and Stock Market Performance: Cross-Sectional Evidence from 70 Countries
21 Pages Posted: 12 May 2014 Last revised: 4 Feb 2015
Date Written: May 8, 2014
Abstract
This study investigates the impact of economic growth risk on stock market performance in 70 countries. Based on the analysis of the full sample, on average, 1% increase in economic growth risk is associated with 0.23% (p = 0.058) increase in stock market return. Looking at stock market return calculated using January returns only, on average, 1% increase in economic growth risk is associated with 0.647% (p = 0.013) increase in stock market return. On average, 1% increase in economic growth risk is associated with 0.469% (p = 0.025) increase in stock market January return across developed markets. Likewise, on average, 1% increase in economic growth risk is associated with 0.695% (p = 0.069) increase in stock market January return across frontier markets. Finally, economic growth risk does not appear to have any impact on stock market return across emerging markets.
Keywords: economic growth risk, GDP growth volatility, stock market returns
JEL Classification: N10, G10, G11, G15
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