Stock Returns and Real Activity: A Century of Evidence

G. Schwert

No 3296, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the relation between real stock returns and real activity from 1889-1988. It replicates Fama's (1990) results for the 1953-87 period using an additional 65 years of data. It also compares two measures of industrial production in the tests: (1) the series produced by Babson for 1889-1918, spliced with the Federal Reserve Board index of industrial production for 1919-1988, and (2) the new Miron and Romer (1989) index spliced with the Fed index in 1941. Fama's findings are robust for a much longer period -- future production growth rates explain a large fraction of the variation in stock returns. The new Miron-Romer measure of industrial production is less closely related to stock price movements than the older Babson and Federal Reserve Board measures.

Date: 1990-03
Note: ME
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Citations: View citations in EconPapers (320)

Published as The Journal of Finance, Vol. XLV, No. 4, pp. 1237-1257, (September 1990).

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