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  |  SEP 1988

SIDEBAR: Money supply and the S&P 500

Money supply and the S&P 500 I suspect most economists would say that M2 money supply and the S&P 500 are independent of each other. Here is evidence that there are significant serial dependencies between these two important time series. For illustration, trigger the collection of data in the histogram on a large increase (a '3') in money supply. Collect in the histogram, the first sequential large decrease (a '1') to occur in S&P 500 after the trigger (Article Figure 9). If these two time series were independent of each other, the distribution of 1s in this histogram should be evenly distributed among the months. This is not the case. The second sequential 1 (Article Figure 10) also is not evenly distributed. Even the fifth sequential large decrease in the S&P 500 after a large increase ('3') in money supply is not evenly distributed (Article Figure 11).

by Technical Analysis, Inc.

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