Advanced Search
MyIDEAS: Login to save this article or follow this journal

M1, M2, and the U.S. Equity Exchanges

Contents:

Author Info

  • Ali M. Parhizgari, Duong Nguyen

    ()
    (Florida International University, Miami)

Registered author(s):

    Abstract

    We study the relative positions of M1 and M2 in light of their relationships with four U. S. equity exchanges: S&P500, Dow Jones Industrial, Nasdaq, and Wilshire 5000 composite. It is demonstrated that a long-term equilibrium relationship does indeed exist. Short-run dynamics are also considered and are found to be temporary departures from the long-run equilibrium. Based on a model, which yields robust estimated results and is thus considered well behaved, the direction of causality is established. The model is then put further to test to check the predictive power of the M1 and M2 money aggregates. Based on a set of in- and out-of-sample forecast experiments, the results overwhelmingly indicate that M2 is a better predictive measure and hence a superior indicator than M1. The policy implications of these findings in light of the post financial crisis and the November 2010 US Fed “quantitative easing” policies are discussed.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.ffe.esc-lille.com/papers/Vol8-2ms342Parhizgari.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by SKEMA Business School in its journal Frontiers in Finance and Economics.

    Volume (Year): 8 (2011)
    Issue (Month): 2 (October)
    Pages: 112-135

    as in new window
    Handle: RePEc:ffe:journl:v:8:y:2011:i:2:p:112-135

    Contact details of provider:
    Web page: http://www.ffe.esc-lille.com

    Related research

    Keywords: Money supply; M1; M2; Stock return; Granger causality; Error Correction Model; Forecasting.;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ffe:journl:v:8:y:2011:i:2:p:112-135. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sophie Bodo).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.