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Alternative Evaluation of S&P 500 index in Relation to Quantitative Easing

Author

Listed:
  • Širůček, Martin
  • Galečka, Ondřej

Abstract

The paper focuses on the impact of money supply on the S&P 500 stock index. The main goal is by using selected indicators identify the bubble. That is meaning, according to the results bring to the investors recommendations what indicator they should to use for early identification of the price bubble. The paper deals with two „standard” indicator and one „behavioural”. The first use the rational price bubble variable and compare it with the standard deviation, the second one deals with the ratio market capitalisatuion and GDP. As „behaioural” indicator analyses of EPUI and VIX index was used. Empirical results were comfirmed by the „behaivoural”variables. Higher accuracy of results acquired the second empirical method, where the divisor was used.

Suggested Citation

  • Širůček, Martin & Galečka, Ondřej, 2016. "Alternative Evaluation of S&P 500 index in Relation to Quantitative Easing," MPRA Paper 80526, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:80526
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    File URL: https://mpra.ub.uni-muenchen.de/80526/1/MPRA_paper_80526.pdf
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    References listed on IDEAS

    as
    1. Homa, Kenneth E & Jaffee, Dwight M, 1971. "The Supply of Money and Common Stock Prices," Journal of Finance, American Finance Association, vol. 26(5), pages 1045-1066, December.
    2. Jose A. Scheinkman & Wei Xiong, 2003. "Overconfidence and Speculative Bubbles," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1183-1219, December.
    3. Olivier J. Blanchard & Mark W. Watson, 1982. "Bubbles, Rational Expectations and Financial Markets," NBER Working Papers 0945, National Bureau of Economic Research, Inc.
    4. Shigenori Shiratsuka, 2001. "Asset prices, financial stability and monetary policy: based on Japan’s experience of the asset price bubble," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 261-284, Bank for International Settlements.
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    More about this item

    Keywords

    quantitative easing; money supply; MZM; S&P 500; price bubble; policy uncertainty index;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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