Financial crisis and market risk premiumIdentifying multiple structural changes
- García Machado, Juan José
- Congregado Ramírez de Aguilera, Emilio
- Golpe Moya, Antonio Aníbal
- Vega Jiménez, Juan José de la
ISSN: 0121-5051
Año de publicación: 2011
Volumen: 21
Número: 39
Páginas: 153-160
Tipo: Artículo
Otras publicaciones en: Innovar: revista de ciencias administrativas y sociales
Resumen
The relationship between macroeconomic variables and stock market returns is, by now, well-documented in the literature. However, in this article we examine the long-run relationship between stock and bond markets returns over the period from 1991:11 to 2009:11, using Bai and Perron�s multiple structural change approach. Findings indicate that while the market risk premium is usually positive, periods with negative values appear only in three periods (1991:1-1993:2, 1998:3-2002:2 and from 2007:1-2009:11) leading to changes in the GDP evolution. Thereby, the study shows the presence of structural breaks in the Spanish market risk premium and its relationship with business cycle. These findings contribute to a better understanding of close linkages between the financial markets and the macroeconomic variables such as GDP. Implications of the study and suggestions for future research are provided.