Volatility relationship between stock performance and real output

Eun Ahn and Jin Man Lee

Applied Financial Economics, 2006, vol. 16, issue 11, 777-784

Abstract: This paper investigates the interaction between stock index returns and the real output growth for five countries. This study focuses on the second moment relationship using various forms of the bivariate generalized autoregressive conditional heteroscedastic models (BGARCH). This study shows that interactivity between stock returns and growth rates are robust at the second order. The results imply that high volatility in the stock market is likely to be followed by increased volatility in the output sector and periods of high volatility in real output is likely to be followed by increased volatility in the stock market.

Date: 2006
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DOI: 10.1080/09603100500424775

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