International Stock Returns and Business Cycles

Release Date: November 1, 1994

It seems self evident that the behavior of the stock market should be linked to the behaviour of the economy, but real world experience shows that the links between the two are far from straightfoward. Recent research on asset pricing has examined the determinants of relative returns on national stock markets, including the impact of business cycle variables. Recent research on business cycles has focused on the synchronization and transmission of business cycles between countries and the degree to which international capital markets allow world-wide sharing of risks.

This is a report of a conference held in June 1994, and organized by CEPR and the Weiss Center for International Financial Research at the Wharton School, University of Pennsylvania, convened to promote interaction between these two groups of research, stimulate the cross-fertilization of ideas, and tease out some possible explanations for the puzzling behaviour of stock markets and real economies. The report contains a review essay of the conference by Robert Chote, Economics Correspondent of the Independent, plus non-technical summaries of all the papers presented.