Dynamics in the co-movement of economic growth and stock return: comparison between the United States and China

Yu Jiang

Economic Research-Ekonomska Istraživanja, 2019, vol. 32, issue 1, 1965-1976

Abstract: The performance of the stock market is usually regarded as the barometer of economic growth and stock return and economic growth are, therefore, believed to co-move. However, the co-movement may exhibit different characteristics in various economic systems. This paper studies the co-movement of stock return and economic growth in two representative countries, the U.S. and China, with entirely different economic systems. The degree of co-movement is measured by the correlation of stock index return and G.D.P. growth rate and a time-varying copula model is applied to capture the dynamic characteristics of the co-movement. Empirical results show that the co-movement of stock return and economic growth is relatively strong but fluctuant in the U.S. and is relatively weak but stable in China. The differences in the co-movement can be interpreted by different economic growth modes in the U.S. and China.

Date: 2019
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DOI: 10.1080/1331677X.2019.1642786

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