Industrial production and stock returns

This project extends the work of Schwert (1990) titled "Stock Returns and Real Activity: A Century of Evidence" which looks at the relationship between real activity, as measured by industrial production, and stock returns. The intent is to see if the relationship between stock returns and industrial production continues to hold with the addition of the years 1989 to 2004 with the hope the relationship still exists. It is expected that the relationship between Industrial Production and Stock Returns will be broken due to the transformation of the US economy from a manufacturing to a service oriented economy in the latter part of the 20th century however the finding s indicate that the relationship continues to exist and appears to have strengthen in the sample period.