Economic Growth Risk and Stock Market Performance: Cross-Sectional Evidence from 70 Countries

Abstract

This study investigates the impact of economic growth risk on stock market performance in 70 countries. Based on the analysis of the full sample, on average, 1% increase in economic growth risk is associated with 0.23% (p = 0.058) increase in stock market return. Looking at stock market return calculated using January returns only, on average, 1% increase in economic growth risk is associated with 0.647% (p = 0.013) increase in stock market return. On average, 1% increase in economic growth risk is associated with 0.469% (p = 0.025) increase in stock market January return across developed markets. Likewise, on average, 1% increase in economic growth risk is associated with 0.695% (p = 0.069) increase in stock market January return across frontier markets. Finally, economic growth risk does not appear to have any impact on stock market return across emerging markets.