No support for the idea that economic growth drives stock market performance

Monday, October 08, 2012 Francisco Carneiro 0 Comments

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Elroy Dimson, Paul Marsh and Mike Staunton of London Business School did a study back in early 2010, covering 83 countries over four decades, with the results being published in the 2010 version of the Credit Suisse Global Investment Returns Yearbook. They found little or no support for the idea that economic growth drives stock market performance.

From Niels C. Jensen 4 October 2012
© 2002-2012 Absolute Return Partners LLP

PS Sometimes we forget that what moves markets is the change of expectations. If everybody thinks China is going to growth at 10% yoy and it only delivers 6% the stock market is going down big time. The absolute level of Growth does not matter as you can see below.

Chart 3: Global Equity Returns vs. GDP Growth, 1970-2009

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