The analysis of the relationship between stock returns (volatility) and economic growth (volatility)

• Main Authors: Yuan-Ming Lee, 李源明
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/76102945987139515596

博士 === 國立中正大學 === 國際經濟所 === 94 === The main issue of this dissertation is to discuss the relationship between stock return and the economic growth. It includes three topics which are as follows: Topic 1：The analysis of the relationship between stock returns and economic growth This chapter contains two parts. In the first part, we use the time series data of 28 nations to construct the threshold vector autoregressive (TVAR) model, in which the “modified current depth of recession (MCDR)” is used as the threshold variable. The second part is to construct the threshold autoregressive (TAR) model by using the cross section data of 49 nations The empirical result shows that under the time series data, in the most of nations, the stock return has a positive and significant relationship with the economic growth. However, the effect of the economic growth on the stock return is ambiguous. That is, there exists an indirect causality between them. As for the cross section data, the stock return has a positive and significant relationship with the economic growth. Topic 2：The reexamination of Fama’s “the proxy hypothesis” which analyzes the relationship between real stock returns, inflation and real economic growth In this chapter, we not only construct the TVAR model by using the MCDR as the threshold variable but also extend the single country to multi-countries. The purpose of this chapter is to reexamine Fama’s “the proxy hypothesis” which analyzes the causality among real stock returns, inflation and real economic growth, under different business cycle regimes. The empirical findings are: (1) the inflation Granger-causality the real stock returns, which violates the “Fisher effect”, (2) in the three variables TVAR model, the “the proxy hypothesis” holds when using the real economy growth rate as the proxy variable, but this hypothesis cannot be completely applied to all countries, (3) there exists the two-way Granger-causality between inflation and the real economic growth and (4) the real stock return has a positive relation with the real economic growth under the recession regime. Topic 3：The analysis of the relationship between stock market volatility and output growth volatility To analyze the relationship between the stock market volatility and output growth volatility, we use monthly data of multi-countries to build the TVAR model in which we take the business cycle and economic shocks into consideration. Monthly volatility can be represented by the return square item or obtained from Schwert’s (1989) method. In this chapter we use both ways to constructs models and discuss them respectively. The empirical results are: (1) there exists the two-way Granger-causality between the stock market volatility and output growth volatility under different business cycle regimes and shock regimes, (2) when using the shock (standardizing error of GJR-GARCH model of stock returns) as the threshold variable, in the most of nations, the stock market volatility has a strong relation with the output growth volatility under the negative shock regime and (3) when using the negative MCDR as the threshold variable, the stock market volatility has a relation with the output growth volatility under the recession and expansion regimes. However, there are more nations in the expansion regime than in the recession regime.