Quantitative Easing and the U.S. Stock Market: A Decision Tree Analysis

Review of Economic Analysis 7 (2015)

21 Pages Posted: 11 Apr 2016

See all articles by Ramaprasad Bhar

Ramaprasad Bhar

UNSW Business School, Risk and Actuarial Studies

A. (Tassos) G. Malliaris

Loyola University of Chicago - Department of Economics

Mary Malliaris

Loyola University Chicago

Date Written: April 6, 2016

Abstract

The Financial Crisis of 2007-09 caused the U.S. economy to experience a relatively long recession from December 2007 to June 2009. Both the U.S. government and the Federal Reserve undertook expansive fiscal and monetary policies to minimize both the severity and length of the recession. Most notably, the Federal Reserve initiated three rounds of unconventional monetary policies known as Quantitative Easing. These policies were intended to reduce long-term interest rates when the short term federal funds rates had reached the zero lower bound and could not become negative. It was argued that the lowering of longer-term interest rates would help the stock market and thus the wealth of consumers. This paper investigates this hypothesis and concludes that quantitative easing has contributed to the observed increases in the stock market’s significant recovery since its crash due to the financial crisis.

Keywords: Quantitative Easing, Decision Tree, Stock Market, S&P 500 Index, 10 Year Notes

JEL Classification: C10; C45; C58; E52; E58

Suggested Citation

Bhar, Ramaprasad and Malliaris, A. (Tassos) G. and Malliaris, Mary, Quantitative Easing and the U.S. Stock Market: A Decision Tree Analysis (April 6, 2016). Review of Economic Analysis 7 (2015). Available at SSRN: https://ssrn.com/abstract=2760029

Ramaprasad Bhar

UNSW Business School, Risk and Actuarial Studies ( email )

Sydney, NSW 2052
Australia

A. (Tassos) G. Malliaris (Contact Author)

Loyola University of Chicago - Department of Economics ( email )

16 E. Pearson Ave
Quinlan School of Business
Chicago, IL 60611
United States
312-915-6063 (Phone)

Mary Malliaris

Loyola University Chicago ( email )

16 East Pearson Street
Chicago, IL 60611
United States
312-915-7064 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
101
Abstract Views
470
rank
281,709
PlumX Metrics