On the Economic Link between Asset Prices and Real Activity

33 Pages Posted: 31 Jul 2010  

Juan Ignacio Peña

Universidad Carlos III de Madrid - Department of Business Administration

Rosa Rodríguez

Universidad Carlos III de Madrid - Department of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: March 2005

Abstract

This paper presents a model linking two financial markets (stocks and bonds) with the real business cycle, in the framework of a CCAPM with GIP preferences. Besides the interest rate term spread, the model includes a new variable to forecast economic activity: the stock market term spread. This is the slope of expected stock market returns. The empirical evidence documented in this paper suggests systematic relationships between the state of the business cycle and the shapes of two yield curves (interest rates and expected stock returns).

Keywords: Stock market, Interest rates, Economic growth

JEL Classification: G12, E44

Suggested Citation

Peña, Juan Ignacio and Rodríguez, Rosa, On the Economic Link between Asset Prices and Real Activity (March 2005). Available at SSRN: https://ssrn.com/abstract=726301 or http://dx.doi.org/10.2139/ssrn.726301

Juan Ignacio Peña (Contact Author)

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain
34 91 624 9625 (Phone)
34 91 624 9608 (Fax)

Rosa Rodriguez

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

HOME PAGE: http://www.business.uc3m.es/en/faculty/profesor/perfil/42

Register to save articles to
your library

Register

Paper statistics

Downloads
103
rank
219,472
Abstract Views
526
PlumX