Economic Growth Risk and Stock Market Performance: Cross-Sectional Evidence from 70 Countries

21 Pages Posted: 12 May 2014 Last revised: 4 Feb 2015

See all articles by Vichet Sum

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

An Wang

Bates White Economic Consulting

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

Suggested Citation

Sum, Vichet and Wang, An, Economic Growth Risk and Stock Market Performance: Cross-Sectional Evidence from 70 Countries (May 8, 2014). Available at SSRN: https://ssrn.com/abstract=2434832 or http://dx.doi.org/10.2139/ssrn.2434832

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

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HOME PAGE: http://vichetsum.com

An Wang

Bates White Economic Consulting

1300 Eye Street NW
Suite 600
Washington, DC 20005
United States

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