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dc.contributor.authorMcMillan, Daviden_UK
dc.description.abstractThis paper examines the ability of bond and stock markets to predict subsequent GDP growth over a range of horizons for twelve international countries. The results, using linear, probit, time- and regime-varying in-sample regressions and out-of-sample forecasting, confirm the view that both financial markets exhibit predictive power for future output growth. Moreover, there is notable variation within the strength of the predictive relation, for example, predictive power increases during the financial crisis period. Results suggest that while the term structure arguably exhibits stronger predictive power, both series contain distinct predictive information. Notably, predictive power emanating from the stock return series appears stronger over shorter (up to four-quarter) time horizons, while the term structure series exhibits more consistent predictive power over a range of horizons. Considering different regimes, we observe that the bond market exhibits greater predictive power for a flatter yield curve and lower stock prices relative to fundamentals, while the stock market exhibits greater predictive power for a steeper yield curve and higher relative stock prices. This suggests that the two financial markets exhibit different information content for future output growth. This view is further supported by forecast results whereby a model that includes both financial series outperforms a model that only includes one. Forecast encompassing tests further support the view that stock returns contain additional information over that presented by the term structure alone.en_UK
dc.relationMcMillan D (2020) Predicting GDP Growth with Stock and Bond Markets: Do They Contain Different Information?. International Journal of Finance and Economics.en_UK
dc.rightsThis item has been embargoed for a period. During the embargo please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author. You can only request a copy if you wish to use this work for your own research or private study.en_UK
dc.subjectGDP Growthen_UK
dc.subject, Forecastingen_UK
dc.titlePredicting GDP Growth with Stock and Bond Markets: Do They Contain Different Information?en_UK
dc.typeJournal Articleen_UK
dc.rights.embargoreason[gdp_ts_r_revised.pdf] Until this work is published there will be an embargo on the full text of this work. Publisher requires embargo of 24 months after formal publication.en_UK
dc.citation.jtitleInternational Journal of Finance and Economicsen_UK
dc.type.statusAM - Accepted Manuscripten_UK
dc.description.notesOutput Status: Forthcomingen_UK
dc.contributor.affiliationAccounting & Financeen_UK
Appears in Collections:Accounting and Finance Journal Articles

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