The effect of quantitative easing on stock prices: a structural time series approach

Al-Jassara, S and Moosa, I 2019, 'The effect of quantitative easing on stock prices: a structural time series approach', Applied Economics, vol. 51, no. 17, pp. 1817-1827.


Document type: Journal Article
Collection: Journal Articles

Title The effect of quantitative easing on stock prices: a structural time series approach
Author(s) Al-Jassara, S
Moosa, I
Year 2019
Journal name Applied Economics
Volume number 51
Issue number 17
Start page 1817
End page 1827
Total pages 11
Publisher Elsevier
Abstract A structural time series model is estimated and tested to examine the effect of quantitative easing (QE) on US stock prices. The model is estimated by maximum likelihood in a Time-varying parametric (TVP) framework, using the S&P 500 index as the dependent variable and the Fed's balance as an explanatory variable in addition to the unobserved components accounting for the behaviour of variables that do not appear explicitly in the equation. The results show that QE had a sizeable, but not exclusive, effect on stock prices and that stock prices were also affected by other missing variables and cyclical movements. Several explanations are presented for the rise of the US stock market in the post-QE period, particularly since the election of Donald Trump.
Subject Financial Economics
Keyword(s) Federal reserve
Quantitative easing
stock prices
structural time series modelling
DOI - identifier 10.1080/00036846.2018.1529396
Copyright notice © 2018 Informa UK Limited, trading as Taylor & Francis Group
ISSN 0003-6846
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