Using dynamic conditional correlations (DCCs), we estimate the time-varying relationship between stock market returns and output growth based on monthly data for the US over the 1964:01 to 2012:07 time period. We demonstrate that in general, this relationship is positive and present during the...

The relationship between stock market returns and real economic output has been studied in many empirical works over several decades. We present a simple methodology to verify the time-varying structure of this “returns-growth” relationship using dynamic conditional correlation model....