This paper uses aggregate Japanese data and sectoral U.S. data to explore the properties of the joint behavior of stock prices and total factor productivity (TFP) with the aim of highlighting data patterns that are useful for evaluating business cycle theories. The approach used follows that...

It is often argued that changes in expectation are an important driving force of the business cycle. However, it is well known that changes in expectations cannot generate positive co-movement between consumption, investment and employment in the most standard neo-classical business cycle...

In this paper we show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run -- and therefore does not look like a standard technology shock -- but affects productivity with substantial delay...