An International Analysis of Earnings, Stock Prices and Bond Yields

By A. Durre, P. Giot. Social Science Research Network, 2005

201 citations recorded by the source corpus.

This paper assesses the possible contemporaneous relationship between stock index prices, earnings and long-term government bond yields for a large number of countries and over a time period that spans several decades. In a cointegration framework, our analysis looks at three hypotheses. First, is there a long-term contemporaneous relationship between earnings, stock prices and government bond yields? Second, does a deviation from this possible long-run equilibrium impact stock prices such that the equilibrium is restored? Third, do government bond yields play a significant role in the long-run relationship or does the latter only involve stock prices and earnings? We also study the short-term impact of changes in long-term government bond yields on stock prices and discuss our short-term and long-term results in light of the recent developments regarding the so-called Fed model.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/f5683fb617a2a7a507bbd40a7fcb3f25129633a1