Investigating the Links between Growth and Real Stock Price Changes with Empirical Evidence from the G-7 Economies

45 Pages Posted: 25 Aug 2001

See all articles by Sarantis C. Kalyvitis

Sarantis C. Kalyvitis

Athens University of Economics and Business - Department of International and European Economic Studies

Christis Hassapis

University of Cyprus

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Abstract

This paper investigates the link between real stock price changes and economic growth. We develop a simple growth model, which presents the relationship between real stock prices and output. Evidence from the G-7 economies by use of the VAR methodology shows that real stock price changes and output growth are strongly related, as predicted by the theoretical model. The bivariate framework also provides useful information for understanding the response of economic growth and real stock prices to external shocks.

Keywords: economic growth, real stock returns, Vector Autoregression.

JEL Classification: C32, E60

Suggested Citation

Kalyvitis, Sarantis C. and Hassapis, Christis, Investigating the Links between Growth and Real Stock Price Changes with Empirical Evidence from the G-7 Economies. Available at SSRN: https://ssrn.com/abstract=279148 or http://dx.doi.org/10.2139/ssrn.279148

Sarantis C. Kalyvitis (Contact Author)

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

Patission Str 76
GR-10434 Athens
Greece

Christis Hassapis

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+357-2-892116 (Phone)
+357-2-750310 (Fax)

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