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Title: |
Money Growth Variability and Stock Returns: An Innovations Accounting
Analysis |
| Author: |
Abdullah, Dewan
A. |
| Author
Affiliation: |
Eastern MI U |
| Source: |
International Economic Journal, Winter 1998, v. 12, no. 4, pp. 89-104 |
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Publication Date: |
Winter 1998 |
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Abstract: |
This paper employs a seven variable vector
autoregression system to analyze the effects of money growth variability
on British stock returns using the London share price index. Other
variables included in the model are Ml money, budget deficits and
surpluses, industrial production, consumer price index, and a long term
interest rate. Economic implications are assessed by computing the
forecast error variance decompositions following Sims (1980). The
results of the analysis suggest that money growth variability accounts
for 22.82% and 19.53% of the variance of interest rates and stock
returns respectively, and hence is considered to be an important
influence concerning the risk and uncertainty associated with returns on
investment in stocks and other financial assets. |
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