Stock Returns and Output Growth in Emerging and Advanced Economies

IMF Working Papers, May 1, 2000

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Stock Returns and Output Growth in Emerging and Advanced Economies

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Bibliographic details

• Authors: Paolo Mauro
• Published: May 1, 2000
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451851274.001

Summary findings

• The paper studies the correlation between output growth and lagged stock returns in a panel of emerging market economies and advanced economies.
• The correlation is as strong in emerging market economies as in advanced economies.
• Asset prices therefore contain valuable information to forecast output also in emerging market economies.
• The strength of the correlation between output growth and lagged stock returns is significantly related to a number of stock market characteristics, including:
  • the number of listed domestic companies and initial public offerings,
  • a high market capitalization to GDP ratio,
  • English legal origin.

Subjects and keywords

• Subject: Emerging and frontier financial markets; Financial institutions; Financial markets; Market capitalization; Production; Production growth; Stock markets; Stocks
• Keywords: Africa; broad money growth; Emerging and frontier financial markets; emerging markets; emerging markets Factbook; Leading indicators; Market capitalization; narrow money; output growth; Production growth; returns-growth association; stock; stock markets; stock return; Stocks; WP

Research implications

• Asset prices (lagged stock returns) can serve as leading indicators for output growth forecasting in both emerging and advanced economies.
• Cross-country variation in the predictive strength of stock returns is associated with observable stock market features (listed companies, IPO activity) and structural characteristics (market capitalization to GDP, legal origin).

Source: IMF Working Paper "Stock Returns and Output Growth in Emerging and Advanced Economies", Paolo Mauro, May 1, 2000.

Content in this bundle

• Stock Returns and Output Growth in Emerging and Advanced Economies - WP/00/89
  • Stock Returns and Output Growth in Emerging and Advanced Economies - WP/00/89 (Markdown version)
  • Stock Returns and Output Growth in Emerging and Advanced Economies - WP/00/89 (PDF)