Output and stock prices: New evidence from the robust wavelet approach

Aviral Tiwari, Malay Bhattacharyya, Debojyoti Das () and Muhammad Shahbaz

Finance Research Letters, 2018, vol. 27, issue C, 154-160

Abstract: This article introduces a new dimension to the relationship between economic growth and stock prices in time-frequency domain for a period spanning over 215 years. The bidirectional causalities between the two variables of interest are captured in time-frequency domain using wavelet-based transformation technique without spectral matrix factorization. We find the evidences of: (a) stronger causal effect from GDP to stock prices than otherwise and (b) the intensity of negative shocks in GDP to stock prices to be more severe than positive shocks. In addition, we also find significant interaction between the variables in the longer run.

Date: 2018
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:27:y:2018:i:c:p:154-160

DOI: 10.1016/j.frl.2018.02.005

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