G. William Schwert

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

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

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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

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Cited 218 times in the SSCI and SCOPUS through 2019

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© Copyright 1990, American Finance Association

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