Long-Run Relationship between Economic Growth and Stock Returns: An Empirical Investigation on Canada and the United States Cover Image

Long-Run Relationship between Economic Growth and Stock Returns: An Empirical Investigation on Canada and the United States
Long-Run Relationship between Economic Growth and Stock Returns: An Empirical Investigation on Canada and the United States

Author(s): Bansi Sawhney, Mete Feridun, Emmanuel Anoruo
Subject(s): Economy
Published by: Ekonomický ústav SAV a Prognostický ústav SAV
Keywords: stock returns; interest rates; economic growth; Canada; the United States

Summary/Abstract: This article examines the long run relationship between economic growth and stock prices for Canada and the United States through cointegration estimation procedure, and it implements the Vector Error Correction Models (VECM) to abstract simultaneously the short- and long-run information in the modelling process. Results from the cointegration tests reveal that economic growth and stock prices share long run equilibrium relationship for both Canada and the U.S. The results from the VECM indicate that for the U.S., causality runs from economic growth to stock prices but not vice versa. However for Canada, the results reveal that there is a bidirectional causality between economic growth and stock prices.

  • Issue Year: 54/2006
  • Issue No: 06
  • Page Range: 584-596
  • Page Count: 13
  • Language: English