alexa Equity Prices and Real Output: Evidence from a Structur
ISSN: 2167-0234

Journal of Business & Financial Affairs
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Research Article

Equity Prices and Real Output: Evidence from a Structural VAR f or the MINT Economies

Olawale OH*

ALBA Graduate Business School at the American College of Greece, Athens, Greece

*Corresponding Author:
Olawale OH
ALBA Graduate Business School at The American College of Greece
Athens, Greece
Tel: +2348068684478
E-mail:[email protected]

Received November 17, 2015; Accepted January 06, 2016; Published January 20, 2016

Citation: Olawale OH (2016) Equity Prices and Real Output: Evidence from a Structural VAR for the MINT Economies. J Bus Fin Aff 5:161. doi:10.4172/2167-0234.1000161

Copyright: © 2016 Olawale OH. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.



This paper presents a bivariate structural VAR model which investigates the interrelationships between the stock market indexes of the MINT economies - Mexico, Indonesia, Nigeria and Turkey; and a significant macro-economy proxy measured by the growth rate of industrial production using monthly data from 2000:1 to 2014:12 obtained from DataStream International, World bank, IMF and stock exchange sites of each countries where available. Improving on previous studies, we employed the Bai and Perron test to determine the significant break period and the Coefficient covariance matrix was specified by employing the HAC (Newey-West) method and allowing error distributions to differ across breaks which identified a common break (pre and post crisis) period for all the MINT economies corresponding to respective economic activity of the countries. Examining possible relationship between the variables, our Granger/ Block exogeneity test reveals that, the null hypothesis will not be rejected in all cases, except the hypothesis that stock returns has a lead-lag effect on industrial production for the case of Mexico during the pre-crisis period but reverse is not the case. Our VAR estimation revealed that real activity shocks only explain a small fraction of the variability in real stock prices during the pre-crisis period than the post-crisis period in the case of Indonesia, Nigeria and Turkey excluding Mexico which explained larger variation in the pre-crisis than the post-crisis period for both the stock return and real activity. The results also reveals smaller variation of each variable on one another for variation of real activities due to innovations from stock returns for Nigeria and Indonesia alone while Mexico ant Turkey depicts the opposite. Thus, the study provides additional evidence for the absence of the direct linkage between real stock returns and real economic activities measured by industrial production which shows that the market is inefficient and perhaps not derived or guided by fundamentals, more so, the impact of the global financial crisis is also revealed and policy recommendation provided.


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