U.S. stock markets and the role of real interest rates

Wanling Huang, Andre Mollick () and Khoa Huu Nguyen

The Quarterly Review of Economics and Finance, 2016, vol. 59, issue C, 231-242

Abstract: Using weekly data from January 3, 2003 to March 27, 2015, we examine the responses of U.S. stock returns (S&P 500, DJIA, and NASDAQ) to monetary policy, controlling for WTI oil prices and the value of the U.S. dollar (USD) against major currencies. Based on differences between the federal funds rate and inflation expectations, U.S. real interest rates have become continuously negative since January 28, 2009. Vector auto-regressions (VARs) suggest stronger linkages more recently and vine copula models identify the structure of dependence across these markets, which can help investors optimize portfolio diversification.

Keywords: Exchange rates; Oil prices; Real interest rates; U.S. stock markets; Vine copulas (search for similar items in EconPapers)
JEL-codes: F31 G15 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:59:y:2016:i:c:p:231-242

DOI: 10.1016/j.qref.2015.07.006

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