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Stock prices and the money supply: Testing for informational efficiency

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Date Issued:
1999
Summary:
For a stock market to allocate funds efficiently, stock prices should immediately incorporate all of the information available. If we find that there is a lag between changes in variables that might affect the price of stocks, and the reflection of that change in its price, the market for stocks will be inefficient. This thesis tests the stock markets in six of the largest developed economies for informational efficiency. It tests the stock markets in Canada, France, Germany, Japan, The United Kingdom, and The United States, for the existence of a causal relationship between changes in the money supply and changes in stock prices, and applies the Granger-causality test to perform it. A stock market is informationally inefficient if a causal relationship between changes in the money supply and changes in stock prices is found. In this case, money supply changes could be used to predict movements in the prices of stocks, create profitable trading rules, and help us earn above-normal returns, thus casting doubts on the ability of the stock market to allocate funds efficiently.
Title: Stock prices and the money supply: Testing for informational efficiency.
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Name(s): Hernandez, Ulises Angel.
Florida Atlantic University, Degree grantor
Yuhn, Ky-hyang, Thesis advisor
Type of Resource: text
Genre: Electronic Thesis Or Dissertation
Date Issued: 1999
Publisher: Florida Atlantic University
Place of Publication: Boca Raton, Fla.
Physical Form: application/pdf
Extent: 49 p.
Language(s): English
Summary: For a stock market to allocate funds efficiently, stock prices should immediately incorporate all of the information available. If we find that there is a lag between changes in variables that might affect the price of stocks, and the reflection of that change in its price, the market for stocks will be inefficient. This thesis tests the stock markets in six of the largest developed economies for informational efficiency. It tests the stock markets in Canada, France, Germany, Japan, The United Kingdom, and The United States, for the existence of a causal relationship between changes in the money supply and changes in stock prices, and applies the Granger-causality test to perform it. A stock market is informationally inefficient if a causal relationship between changes in the money supply and changes in stock prices is found. In this case, money supply changes could be used to predict movements in the prices of stocks, create profitable trading rules, and help us earn above-normal returns, thus casting doubts on the ability of the stock market to allocate funds efficiently.
Identifier: 9780599211759 (isbn), 15627 (digitool), FADT15627 (IID), fau:12384 (fedora)
Collection: FAU Electronic Theses and Dissertations Collection
Note(s): College of Business
Thesis (M.S.)--Florida Atlantic University, 1999.
Subject(s): Stocks--Prices
Money supply
Stock exchanges
Held by: Florida Atlantic University Libraries
Persistent Link to This Record: http://purl.flvc.org/fcla/dt/15627
Sublocation: Digital Library
Use and Reproduction: Copyright © is held by the author, with permission granted to Florida Atlantic University to digitize, archive and distribute this item for non-profit research and educational purposes. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder.
Use and Reproduction: http://rightsstatements.org/vocab/InC/1.0/
Host Institution: FAU
Is Part of Series: Florida Atlantic University Digital Library Collections.