The U.S. Stock Market and Fundamentals: A Historical Decomposition

David Dupuis and David Tessier

Staff Working Papers from Bank of Canada

Abstract: The authors identify the fundamentals behind the dynamics of the U.S. stock market over the past 30 years. They specify a structural vector-error-correction model following the methodology of King, Plosser, Stock, and Watson (1991). This methodology identifies structural shocks with the imposition of long-run restrictions. It allows the authors to calculate an equilibrium measure of stock market value based on the permanent components of the time series. A better understanding of the components that drive stock market movements could provide insight into the potential effects of the recent technological revolution on the dynamics of the stock market's equilibrium value, as suggested by Hobijn and Jovanovic (2001).

Keywords: Transmission; of; monetary; policy (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2003
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:03-20

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