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Time-varying causality between stock prices and macroeconomic fundamentals: Connection or disconnection?

Author

Listed:
  • Vincent Fromentin

    (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

Abstract

This study investigates the connection/disconnection between the stock market and macroeconomic fundamentals in the United States from January 1960 to December 2021. Using a recent time-varying Granger causality framework, tests revealed asymmetric bidirectionnal causality. The lead-lag relationships between stock prices and key macroeconomic indicators are more prevalent during recession phases. However, the significance and intensity of the causal relationships during the Covid crisis varied greatly; which could indicate a possible disconnection.

Suggested Citation

  • Vincent Fromentin, 2022. "Time-varying causality between stock prices and macroeconomic fundamentals: Connection or disconnection?," Post-Print hal-04206765, HAL.
    • Handle: RePEc:hal:journl:hal-04206765
    DOI: 10.1016/j.frl.2022.103073
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    Citations

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    Cited by:

    1. Ahmed, Walid M.A. & Sleem, Mohamed A.E., 2023. "Short- and long-run determinants of the price behavior of US clean energy stocks: A dynamic ARDL simulations approach," Energy Economics, Elsevier, vol. 124(C).
    2. Mohamad, Azhar & Fromentin, Vincent, 2023. "Herd and causality dynamics between energy commodities and ethical investment: Evidence from the different phases of the COVID-19 pandemic," Energy Economics, Elsevier, vol. 126(C).
    3. Xiong, Youlin & Shen, Jun & Yoon, Seong-Min & Dong, Xiyong, 2024. "Macroeconomic determinants of the long-term correlation between stock and exchange rate markets in China: A DCC-MIDAS-X approach considering structural breaks," Finance Research Letters, Elsevier, vol. 61(C).
    4. Ferreira, Joaquim & Morais, Flávio, 2023. "Predict or to be predicted? A transfer entropy view between adaptive green markets, structural shocks and sentiment index," Finance Research Letters, Elsevier, vol. 56(C).
    5. Fromentin, Vincent & Pecchioli, Bruno & Moroz, David, 2024. "Time-varying causality among whisky, wine, and equity markets," Finance Research Letters, Elsevier, vol. 63(C).
    6. Hong, Yun & Zhang, Rushan & Zhang, Feipeng, 2024. "Time-varying causality impact of economic policy uncertainty on stock market returns: Global evidence from developed and emerging countries," International Review of Financial Analysis, Elsevier, vol. 91(C).

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