Is stock market performance (such as stock market index) a good indicator for the health of an economy? Or not really.
The growth of the stock market to a certain limit may indicate the development of the national economy, but As M. Tugan-Baranovsky noted , there are different trends in the development of industrial capital and money, which ultimately determine the cyclical development of the markets
The growth of the stock market to a certain limit may indicate the development of the national economy, but As M. Tugan-Baranovsky noted , there are different trends in the development of industrial capital and money, which ultimately determine the cyclical development of the markets
No. Not a good indicator for the health of an economy. The stock market performance is fired by the quantitity of emitted fiat bank credit money; the lower the reserve requirement for private commercial banks, the higher the volatility of the stock markets. Лариса Шутько came already very close to the vital point https://www.sociostudies.org/authors/kondratieff_n/ , concerning the dynamic motion in capitalist market economies, by pointing to the work of MI Tugan-Baranovksy.
I, actually, do not have interest in stocks. So I do not follow the trend.
In my opinion, in case of perfectly strong and efficient market(as in developed nations), it may be so in majority of the cases,however exceptions may be there.But in developing economies, having semi strong or even weak, markets, the stock indices may not correctly reveal the real status of financial health of the company. In fact, a lot of window dressing and various other unethical financial practices may be adopted by the companies to depict a good picture than what actually it is.
Yes, although it is considered primarily an indicator of investors' expectations about the future behavior of the economy. For example, Estrella and Mishkin (1998) report that the annual return on the S&P-500 stock market index, along with other indicators, can signicantly increase the power of a model to predict future recessions.
Like all indicators, it has limitations, so its use can be more or less recommended according to the objective of a study.
Of cause, it is an immediate indicator of the shocks which affect economic development. However, it can not be an exact indicator, bearing in mind that development is a long run process.
The stock market helps measure the degree of investor confidence in the economy in general and public policy in particular. Investing in productive companies is healthy for the country.
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