Stock Returns and Real Activity: A Century of Evidence

Stock Returns and Real Activity: A Century of Evidence ABSTRACT This paper analyzes the relation between real stock returns and real activity from 1889–1988. It replicates Fama's (1990) results for the 1953–1987 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 Federal Reserve Board 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Stock Returns and Real Activity: A Century of Evidence

The Journal of Finance, Volume 45 (4) – Sep 1, 1990

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Publisher
Wiley
Copyright
1990 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1990.tb02434.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper analyzes the relation between real stock returns and real activity from 1889–1988. It replicates Fama's (1990) results for the 1953–1987 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 Federal Reserve Board 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.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1990

References

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