Looking Far in the Past: Revisiting the Growth-Returns Nexus with Nonparametric Tests

33 Pages Posted: 10 Aug 2006 Last revised: 23 Aug 2008

See all articles by Ekaterini Panopoulou

Ekaterini Panopoulou

Essex Business School

Nikitas Pittis

University of Piraeus - Department of Banking and Financial Management

Sarantis C. Kalyvitis

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

Date Written: April 2006

Abstract

In this paper we reexamine the linkages between output growth and real stock price changes for the G7 countries using non-parametric procedures to account for the impact of long-lagged observations. We find that correlation between growth and returns is detected at larger horizons than those typically employed in parametric studies. The major feedbacks emerge from stock price changes to growth within the first 6 to 12 months, but we show that significant feedbacks may last for up to two or three years.Our evidence also suggests that the correlation patterns differ substantially between the countries at hand when the sectoral share indices are considered.

Keywords: real stock price changes, output growth, long-run covariance matrix

JEL Classification: C14, G10, O51

Suggested Citation

Panopoulou, Ekaterini and Pittis, Nikitas and Kalyvitis, Sarantis C., Looking Far in the Past: Revisiting the Growth-Returns Nexus with Nonparametric Tests (April 2006). IIIS Working Paper No. 134, Available at SSRN: https://ssrn.com/abstract=923559 or http://dx.doi.org/10.2139/ssrn.923559

Ekaterini Panopoulou

Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Nikitas Pittis

University of Piraeus - Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

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

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