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Stock Returns, Money, and Fiscal Deficits

Published online by Cambridge University Press:  06 April 2009

Ali F. Darrat
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Abstract

Using the FPE/multivariate Granger-causality modeling technique, this paper tests whether changes in Canadian stock returns are caused by a number of economic variables, including base money and fiscal deficits. The empirical results from monthly data show that lagged changes in fiscal deficits, in particular, Granger-cause stock returns. If expected returns to equity are not time-varying, such a finding appears inconsistent with market efficiency.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 25 , Issue 3 , September 1990 , pp. 387 - 398
Copyright
Copyright © School of Business Administration, University of Washington 1990

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