US Stock Prices and Macroeconomic Fundamentals

Angela Black, Patricia Fraser and Nicolaas Groenewold
Additional contact information
Patricia Fraser: Aberdeen Asset Management Professor of Finance and Investment Management
Nicolaas Groenewold: Department of Economics, The University of Western Australia

No 01-08, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Using 54 yeras of US quarterly data and a VAR model underpinned by a theory of the relationship between stock prices and output, this paper considers the deviations of US stock prices from their fundamental value. To do this we derive the fundamental price-output ratio and the fundamental stock price under different assumptions regarding the time-variability of returns, and proceed to compare these to actual data. Despite differences between model results, all imply cyclical deviations of actual values from values warranted by the expected growth in output - these deviations being relatively large since 1996.

JEL-codes: C22 E0 E3 G1 G12 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2001
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: U.S. stock prices and macroeconomic fundamentals (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:uwa:wpaper:01-08

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