**2. Data analysis**

The data set of this chapter contains quarterly data of stock index, Gross Domestic Product, and consumer price index (CPI) (or Gross Domestic Product deflator) of 26 countries, including the G7 countries (The USA, UK, Canada, France, German, Italy, and Japan), five Asian countries (the Philippines, Singapore, Hong Kong, Korea, and Taiwan), 12 OECD countries (Australia, Austria Belgium, Denmark, Finland, Mexico, the Netherlands, New Zealand, Norway, Spain, Sweden, and Switzerland), Israel, and South Africa. In addition, we divided the sample countries into three groups, one can see the impact of the development level on the relationship between the stock return and economic growth. Group A has five Asian countries; group B has the G7 countries; group C is contains the 12 OECD members. All the data come from the International Financial Statistics (IFS) database of International Monetary Fund (IMF) and the AREMOS database. The longest sample period is from the first quarter of 1982 to the fourth quarter of 2009. Please refer to Appendix A for detailed descriptions of the data.

The two major variables of this chapter are the economic growth rate (*ry*) and the stock return (*rs*):

$$r\text{\textdegree\\_}\_{\text{\textquotedblleft}} = \Delta \log(GDP\_{\text{\textquotedblright}}) \times 100, \quad r\text{\textquotedblright}\_{\text{\textquotedblleft}} = \Delta \log(ST\_{\text{\textquotedbl}}) \times 100,$$

where is the real GDP, is the stock index, is the economic growth rate, and is the stock return; *i* indicates the country and *t* the time; "Δ" denotes the first difference.
