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Stock Returns and Real Activity: A Century of Evidence

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  • Schwert, G William
Abstract
This paper analyzes the relation between real stock returns and real activity from 1889 to 1988. It replicates Eugene F. Fama's (1990) results for the 1953-87 period using an additional sixty-five 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 1919-88, 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. Copyright 1990 by American Finance Association.

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  • Schwert, G William, 1990. "Stock Returns and Real Activity: A Century of Evidence," Journal of Finance, American Finance Association, vol. 45(4), pages 1237-1257, September.
    • Handle: RePEc:bla:jfinan:v:45:y:1990:i:4:p:1237-57
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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
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    6. Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-565, September.
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