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Stocks and GDP in the long run

Annika Alexius () and Daniel Spång ()
Additional contact information
Daniel Spång: The Fourth Swedish National Pension Fund, Postal: Regeringsgatan 30-32, 103 61 Stockholm, Sweden

No 2015:5, Research Papers in Economics from Stockholm University, Department of Economics

Abstract: Previous studies have documented long run equilibrium relationships between e.g. stock prices and labour income or dividends and consumption. In general equilibrium, output, consumption, labour income, stock prices, and dividends are endogenous variables that are determined by the same stochastic productivity trend. We show that stock prices are cointegrated with domestic and foreign output in the G7 countries, which arguably is a more fundamental relationship than the connection between consumtion and dividends.

Keywords: Stock prices; GDP; Long run risks; Cointegration (search for similar items in EconPapers)
JEL-codes: E44 G12 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2015-06-26
New Economics Papers: this item is included in nep-gro and nep-mac
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