Research Papers in Economics, Department of Economics, Stockholm University
Stocks and GDP in the long run
() and Daniel Spång
Abstract: Previous studies have documented long run equilibrium
relationships between e.g. stock prices and labour income or dividends and
consumption. In general equilibrium, output, consumption, labour income,
stock prices, and dividends are endogenous variables that are determined by
the same stochastic productivity trend. We show that stock prices are
cointegrated with domestic and foreign output in the G7 countries, which
arguably is a more fundamental relationship than the connection between
consumtion and dividends.
Keywords: Stock prices; GDP; Long run risks; Cointegration; (follow links to similar papers)
JEL-Codes: E44; G12; (follow links to similar papers)
11 pages, June 26, 2015
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