Do stock returns lead real economic activity? Evidence from seasonal cointegration analysis

Ozlem Goktas () and Aycan Hepsag ()
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Ozlem Goktas: Istanbul University, Faculty of Economics, Department of Econometrics

Economics Bulletin, 2011, vol. 31, issue 3, 2117-2127

Abstract: This paper investigates the causal relationship between the stock returns and real economic activity in seasonal unit roots and seasonal cointegration framework by taking into account of seasonal behaviors of the stock returns and industrial production as a proxy of real economic activity. We use seasonally unadjusted quarterly Turkish data series that covers the period from first quarter of 1987 to the third quarter of 2009. The empirical results support evidence for the existence of the causal relationship between stock returns and real economic activity. We determine unidirectional causality running from the real economic activity to the stock returns in the six-monthly term. The empirical findings support that only the real economic activity provides the forecasting ability for the stock returns and there is no feedback relationship between the stock returns and the real economic activity.

Keywords: Stock Returns; Real Economic Activity; Seasonal Cointegration (search for similar items in EconPapers)
JEL-codes: C5 E4 (search for similar items in EconPapers)
Date: 2011-07-20
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Citations: View citations in EconPapers (1)

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