IDEAS home Printed from https://ideas.repec.org/p/cgr/cgsser/01-01.html
   My bibliography  Save this paper

Co-movement of Fundamentals: Structural Changes in the Business Cycle

Author

Listed:
  • Stefan Erdorf

    (Graduate School of Risk Management, University of Cologne)

  • Nicolas Heinrichs

    (Graduate School of Risk Management, University of Cologne)

Abstract

The co-movement of stocks and of fundamentals changes across the business cycle. Empirical studies have shown that the correlation of stock returns is stronger in crisis. We show that the correlation of fundamentals is the highest during crisis using a large sample of quarterly firm revenues aggregated to industry data from 1969 to 2009. The results of our study indicate that the co-movement of stocks is driven by the co-movement of fundamentals and is not an irrational reaction of markets. Both correlations between industries and the aggregate market and correlations between earnings confirm our findings.

Suggested Citation

  • Stefan Erdorf & Nicolas Heinrichs, 2010. "Co-movement of Fundamentals: Structural Changes in the Business Cycle," Cologne Graduate School Working Paper Series 01-01, Cologne Graduate School in Management, Economics and Social Sciences, revised Dec 2010.
    • Handle: RePEc:cgr:cgsser:01-01
    as

    Download full text from publisher

    File URL: http://www.cgs.uni-koeln.de/fileadmin/wiso_fak/cgs/pdf/working_paper/CGS_Erdorf_Heinrichs_Fundamentals_final.pdf
    File Function: Version July 2010
    Download Restriction: no
    File URL: http://www.cgs.uni-koeln.de/fileadmin/wiso_fak/cgs/pdf/working_paper/cgswp_01-01.pdf
    File Function: Version December 2010
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    correlation; business cycle; fundamentals; revenues; earnings; co-movement of stock returns; crisis; bootstrap; permutation test; industry classification;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cgr:cgsser:01-01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: David Kusterer (email available below). General contact details of provider: https://edirc.repec.org/data/cgkoede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.