The purpose of this paper is to evaluate if financial asset prices and, in par- ticular, sectoral stock prices can help to predict real economic growth. Earlier studies that have examined the predictive content of stock prices have employed broad-based indices. However, there are reasons to believe that some sectors making up the stock indices are more closely linked to the business cycle than others. The intuition for this is given by Browne and Doran (2005), ”the return from industry groups whose profits are likely to be pro-cyclical relative to the share price of the industry group whose profits are likely to be a-cyclical should be a good.
