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This study examines the dynamic interdependencies between private investment and the stock market for the US economy for the 1970 to 2003 period. The main findings are as follows. First, both investment and stock prices seem to adjust to disequilibria from each other in the long run. Second, past changes in nominal investment have a positive effect on stock prices in the short-run but changes in real investment do not. Third, changes in real stock prices do not affect real investment but past changes in nominal stock prices have a positive short-run effect on investment. Finally, the interest rate appears to affect both magnitudes in the short run but in a notable and negative manner the stock returns.

The objective of this paper is to investigate the causal effect of business investments on stock returns in Turkey for the period following the liberalization of capital flows (1987:01-2006:03

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