GDP and DJIA 2017. An economics student is studying the American economy and finds that the correlation between the inf lation-adjusted Dow Jones Industrial Average and the Gross Domestic Product (GDP) (also inf lation adjusted) is 0.85 for the years 1961 to 2016.

(www.measuringworth.com). From that he concludes that there is a strong positive relationship between the two series and predicts that a drop in the GDP will make the stock market go down. Here is a scatterplot of the adjusted DJIA against the GDP (1961 to 2016) in constant (2010) $.

Describe the relationship and comment on the student’s conclusions.