Stock returns and economic activity: the UK case
This paper investigates the relationships between real stock returns and a number of financial and economic variables for the UK economy for the period 1980 to 1994. We begin by discussing a theoretical model proposed by Balvers et al. and then re-estimate for the UK what may be regarded as an application of that model by Fama applied to the US market. This reproduces Fama's main results. For the UK we than suggest a slightly, different application of the Balvers model, the most important feature of which is the use of expectational macro-economic variables instead of Fama's use of leading values of industrial production. We then go on to investigate the unit root properties of the data and show that much of the data is indeed characterized by the presence of unit root non stationarity In the light of this, we propose an application of the Phillips-Loretan error-correction model and show that this provides a plausible relationship between real stock returns and most of the financial and economic variables.
Year of publication: |
2000
|
---|---|
Authors: | Lovatt, David ; Parikh, Ashok |
Published in: |
The European Journal of Finance. - Taylor & Francis Journals, ISSN 1351-847X. - Vol. 6.2000, 3, p. 280-297
|
Publisher: |
Taylor & Francis Journals |
Subject: | Stock Market Models Cointegration |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Stock returns and economic activity : the UK case
Lovatt, David, (2000)
-
The European monetary system and various tests of policy convergence
Parikh, Ashok K., (1997)
-
A multivariate cointegration approach to the determination of reserves and money balances in India
Parikh, Ashok K., (1997)
- More ...