Wavelet Analysis of Financial Variables and Real Economic

After I survey some papers about time-frequency for economic data, I found that wavelet is a new method to improve models on economic model. It can analyze financial variable which is stock returns or S&P500 and economic data which is US industrial production, then we compare them with cross-correlations. The results show that stock market returns trend to lead the level of economic activity, but only at the highest scales(long periodic time)which is also a lowest frequencies. 1