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STOCK RETURNS, MONEY SUPPLY AND THE DIRECTION OF CAUSALITY

STOCK RETURNS, MONEY SUPPLY AND THE DIRECTION OF CAUSALITY SEPTEMBER 1917 STOCK RETURNS, MONEY SUPPLY AND THE DIRECTION OF CAUSALITY RICHARD ROGALSKI JOSEPHD. VINSO* J. AND I. INTRODUCTION the FORMANY YEARS, economic impact of changes in the money supply has been debated in academia. Research by Brunner [3], Friedman and Schwartz [8], Tobin [28] and others has established that a relationship exists between changes in the supply of money and changes in the prices of other assets held in an investor’s portfolio.’ It is generally agreed that an unexpected increase or decrease in the g o t rate of money results in a change in the equilibrium position of money with rwh respect to other assets in the portfolio of investors. As a result, investors try to adjust the proportion of their asset portfolios represented by money balances. Although investors can adjust, the system cannot since all money balances must be held. As a result, equilibrium is reestablished by changes in the price levels of the various asset categories.2 An important component in the asset portfolio of investors is the value of financial assets, including common stocks. It can be expected that adjustments in portfolios caused by changes in the monetary component will occur in this account http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

STOCK RETURNS, MONEY SUPPLY AND THE DIRECTION OF CAUSALITY

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References (21)

Publisher
Wiley
Copyright
1977 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1977.tb03306.x
Publisher site
See Article on Publisher Site

Abstract

SEPTEMBER 1917 STOCK RETURNS, MONEY SUPPLY AND THE DIRECTION OF CAUSALITY RICHARD ROGALSKI JOSEPHD. VINSO* J. AND I. INTRODUCTION the FORMANY YEARS, economic impact of changes in the money supply has been debated in academia. Research by Brunner [3], Friedman and Schwartz [8], Tobin [28] and others has established that a relationship exists between changes in the supply of money and changes in the prices of other assets held in an investor’s portfolio.’ It is generally agreed that an unexpected increase or decrease in the g o t rate of money results in a change in the equilibrium position of money with rwh respect to other assets in the portfolio of investors. As a result, investors try to adjust the proportion of their asset portfolios represented by money balances. Although investors can adjust, the system cannot since all money balances must be held. As a result, equilibrium is reestablished by changes in the price levels of the various asset categories.2 An important component in the asset portfolio of investors is the value of financial assets, including common stocks. It can be expected that adjustments in portfolios caused by changes in the monetary component will occur in this account

Journal

The Journal of FinanceWiley

Published: Sep 1, 1977

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