JOURNAL ARTICLE
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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
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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
| Section Title | Page | Action | Price |
|---|---|---|---|
| Tobias Böing / Georg Stadtmann: Money Growth and Aggregate Stock Returns | 1 |