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Looking far in the past: revisiting the growth-returns nexus with non-parametric tests

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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 6–12 months, but we show that significant feedbacks may last for up to 2 or 3 years. Our evidence also suggests that the correlation patterns differ substantially between the countries at hand when the sectoral share indices are considered.

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Authors and Affiliations

  1. Department of Statistics and Insurance Science, University of Piraeus, Karaoli & Dimitriou 80, 18534, Piraeus, Greece

    Ekaterini Panopoulou

  2. Department of Banking and Financial Management, University of Piraeus, Karaoli & Dimitriou 80, 18534, Piraeus, Greece

    Nikitas Pittis

  3. Department of International and European Economic Studies, Athens University of Economics and Business, Patision Str 76, 10434, Athens, Greece

    Sarantis Kalyvitis

Authors
  1. Ekaterini Panopoulou
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  2. Nikitas Pittis
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  3. Sarantis Kalyvitis
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Corresponding author

Correspondence to Ekaterini Panopoulou.

Additional information

Financial support under the PYTHAGORAS II project co-financed by the European Social Fund and the Greek Ministry of National Education and Religious Affairs is gratefully acknowledged. We are grateful to A. Antzoulatos, D. Malliaropulos, M. Michael, M. Roche, and participants in the 2005 ASSET Conference and the fourth HFAA Conference for helpful comments and suggestions.

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Panopoulou, E., Pittis, N. & Kalyvitis, S. Looking far in the past: revisiting the growth-returns nexus with non-parametric tests. Empir Econ 38, 743–766 (2010). https://doi.org/10.1007/s00181-009-0288-4

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  • DOI: https://doi.org/10.1007/s00181-009-0288-4

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