Stock Returns and Real Activity

A Century of Evidence


G. William Schwert

University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research


Journal of Finance, 45 (September 1990) 1237-1257


This paper analyzes the relation between real stock returns and real activity from 1889-1988. It replicates Fama's [1990] results for the 1953-87 period using an additional 65 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 1919-1988, and (2) the new Miron and Romer [1989] index spliced with the Fed 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.

Key words: Stock Market, Industrial Production, Real Activity

JEL Classifications: G12, G14, E32


Cited 138 times in the SSCI and SCOPUS through 2016
© Copyright 1990, American Finance Association
A full-text version of this paper, including tables and figures, is available in Acrobat's portable data format (.pdf). The file is about 1,880K and can only be viewed (and printed) using a copy of Acrobat Reader.

If you want the current version of the Adobe Acrobat Reader for other platforms, visit Adobe's web page by clicking the image below.

Click here to download the reprint of the real activity paper.

Click here to download a lower quality (and smaller file size) reprint of the real activity paper.


Return to Publications Page

© Copyright 1998-2017, G. William Schwert

Last Updated on 8/8/2017