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Volatility relationship between stock performance and real output

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  • Eun Ahn
  • Jin Man Lee

Abstract

This paper investigates the interaction between stock index returns and the real output growth for five countries. This study focuses on the second moment relationship using various forms of the bivariate generalized autoregressive conditional heteroscedastic models (BGARCH). This study shows that interactivity between stock returns and growth rates are robust at the second order. The results imply that high volatility in the stock market is likely to be followed by increased volatility in the output sector and periods of high volatility in real output is likely to be followed by increased volatility in the stock market.

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  • Eun Ahn & Jin Man Lee, 2006. "Volatility relationship between stock performance and real output," Applied Financial Economics, Taylor & Francis Journals, vol. 16(11), pages 777-784.
    • Handle: RePEc:taf:apfiec:v:16:y:2006:i:11:p:777-784
    DOI: 10.1080/09603100500424775
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    2. Karunanayake, Indika & Valadkhani, Abbas & O’Brien, Martin, 2012. "GDP Growth and the Interdependency of Volatility Spillovers," MPRA Paper 50398, University Library of Munich, Germany.
    3. Ferrara, Laurent & Marsilli, Clément & Ortega, Juan-Pablo, 2014. "Forecasting growth during the Great Recession: is financial volatility the missing ingredient?," Economic Modelling, Elsevier, vol. 36(C), pages 44-50.
    4. Charles K.D. Adjasi, 2009. "Macroeconomic uncertainty and conditional stock-price volatility in frontier African markets: Evidence from Ghana," Journal of Risk Finance, Emerald Group Publishing, vol. 10(4), pages 333-349, August.
    5. Jin Guo, 2015. "Causal relationship between stock returns and real economic growth in the pre- and post-crisis period: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 47(1), pages 12-31, January.
    6. Mercan Hatipoglu, . "Revisiting Linkages between Stock Prices and Real Activity in OECD Countries: Does Finance Respond to Changing Situation of Economy?," Prague Economic Papers, University of Economics, Prague, vol. 0, pages 1-20.
    7. Ma, Feng & Guo, Yangli & Chevallier, Julien & Huang, Dengshi, 2022. "Macroeconomic attention, economic policy uncertainty, and stock volatility predictability," International Review of Financial Analysis, Elsevier, vol. 84(C).
    8. Abbas Valadkhani & George Chen, 2014. "An empirical analysis of the US stock market and output growth volatility spillover effects on three Anglo-Saxon countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(3), pages 323-335, May.
    9. Mercan Hatipoglu, 2020. "Revisiting Linkages between Stock Prices and Real Activity in OECD Countries: Does Finance Respond to Changing Situation of Economy?," Prague Economic Papers, Prague University of Economics and Business, vol. 2020(1), pages 105-126.

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