{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,10,14]],"date-time":"2026-10-14T15:51:02Z","timestamp":1791993062401,"version":"4.4.0"},"posted":{"date-parts":[[2026]]},"group-title":"SSRN","reference-count":0,"publisher":"Elsevier BV","license":[{"start":{"date-parts":[[2026,1,1]],"date-time":"2026-01-01T00:00:00Z","timestamp":1767225600000},"content-version":"unspecified","delay-in-days":0,"URL":"https:\/\/creativecommons.org\/licenses\/by\/4.0\/"}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":[],"abstract":"<jats:p>Understanding the linkages between real and financial markets is important for a range of economic agents, including policymakers, investors (in both market types) and those engaged in modelling behaviour. This paper argues that financial market correlations (both across international stocks and between stocks and bonds) carries information about subsequent economic conditions. Higher perceived risk results in investor selling all stocks (higher stock correlation) and buying bonds (lower stock and bond correlation), such that a movement in correlations acts as an indicator of future performance. Where investors expect more benign economic conditions, they are more likely to build a balanced stock and bond portfolio (lower stock and higher stock and bond correlations). Using a monthly G7 data set, correlations (constructed from daily data) reveal a negative relation from international stock correlations and a positive relation from stock and bonds correlations for subsequent economic growth and stock returns. The predictive results are robust to the inclusion of alternative risk measures, suggesting that the correlations contain unique information, and to alternative (confounding) views (and modelling) on the relation between risk and the correlations. Further robustness checks involve different approaches for construction of the correlation series and sample periods. While movements in these correlations provide signals to a range of agents, we examine the likely drivers of the predictive relation as an important extension. This reveals that the correlations appear to impact demand-side factors (consumption and inflation) rather than supply-side (investment and productivity). Overall, this paper provides information both in the form of signals for policymakers and investors to act, as well as to enhance our understanding of the linkages between real and financial markets.<\/jats:p>","DOI":"10.2139\/ssrn.7610103","type":"posted-content","created":{"date-parts":[[2026,10,14]],"date-time":"2026-10-14T15:30:28Z","timestamp":1791991828000},"source":"Crossref","is-referenced-by-count":0,"title":["Financial Market Correlations as a Predictor of Output Growth and Stock Returns"],"prefix":"10.2139","author":[{"ORCID":"https:\/\/orcid.org\/0000-0002-5891-4193","authenticated-orcid":true,"given":"David G.","family":"McMillan","sequence":"first","affiliation":[],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"78","container-title":[],"original-title":[],"deposited":{"date-parts":[[2026,10,14]],"date-time":"2026-10-14T15:30:28Z","timestamp":1791991828000},"score":1,"resource":{"primary":{"URL":"https:\/\/www.ssrn.com\/abstract=7610103"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2026]]},"references-count":0,"URL":"https:\/\/doi.org\/10.2139\/ssrn.7610103","relation":{},"subject":[],"published":{"date-parts":[[2026]]},"subtype":"preprint"}}