Menu Expand

Money Growth and Aggregate Stock Returns

Cite JOURNAL ARTICLE

Style

Böing, T., Stadtmann, G. Money Growth and Aggregate Stock Returns. Credit and Capital Markets – Kredit und Kapital, 50(4), 489-508. https://doi.org/10.3790/ccm.50.4.489
Böing, Tobias and Stadtmann, Georg "Money Growth and Aggregate Stock Returns" Credit and Capital Markets – Kredit und Kapital 50.4, 2017, 489-508. https://doi.org/10.3790/ccm.50.4.489
Böing, Tobias/Stadtmann, Georg (2017): Money Growth and Aggregate Stock Returns, in: Credit and Capital Markets – Kredit und Kapital, vol. 50, iss. 4, 489-508, [online] https://doi.org/10.3790/ccm.50.4.489

Format

Money Growth and Aggregate Stock Returns

Böing, Tobias | Stadtmann, Georg

Credit and Capital Markets – Kredit und Kapital, Vol. 50 (2017), Iss. 4 : pp. 489–508

Additional Information

Article Details

Author Details

Dr. Tobias Böing, European-University Viadrina, Große Scharrnstraße 59, 15230 Frankfurt (Oder)

Prof. Dr. Georg Stadtmann, European-University Viadrina, Große Scharrnstraße 59, 15230 Frankfurt (Oder), and University of Southern Denmark, Odense

Abstract

We empirically evaluate the predictive power of money growth measured by M2 for stock returns of the S&P 500 index. We use monthly US data and predict multiperiod returns over 1, 3, and 5 years with long-horizon regressions. In-sample regressions show that money growth is useful for predicting returns. Higher recent money growth has a significantly negative effect on subsequent returns of the S&P 500. An out-of-sample analysis shows that a simple model with money growth as a single predictor performs as goods as the constant expected returns model, while models with several predictor variables perform worse than those simple models.

Table of Contents