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Stock Prices And Economic Growth: Are They Related?, Peter J. Saunders, Koushik Ghosh
Stock Prices And Economic Growth: Are They Related?, Peter J. Saunders, Koushik Ghosh
All Faculty Scholarship for the College of Business
This paper investigates the relationship between economic growth and stock prices in the U.S. Quarterly data on NASDAQ, DJIA, S&P 500 and real GDP ranging from the first quarter of 1971 to the fourth quarter of 2005 are analyzed. Cointegration test results indicate that while RGDP and S&P 500 are not cointegrated, RGDP and NASDAQ appear to be cointegrated. VEC analyses of the RGDP and NASDAQ data indicate that in the short-run, RGDP has a positive impact on stock prices. Further Granger causality testing of the data indicates that RGDP Granger -causes both changes in DJIA and S&P 500.