The effects of stock prices on money demand : an econometric study evidence from Arab Countries (2000-2009)‎

Other Title(s)

تأثيرات أسعار الأسهم على الطلب على النقود : دراسة قياسية-دليل من الدول العربية للفترة (2000-2009)‎

Dissertant

Harahishah, Muhammad Muhammad al-Id

Thesis advisor

al-Zubaydi, Hamzah Mahmud

Comitee Members

Abd Allah, Khalid Amin
al-Kharabishah, Abd Abd al-Hamid
al-Mumani, Ghazi Falah

University

Arab Academy for Financial and Banking Sciences

Faculty

The Faculty of Banking and Financial Sciences

Department

Department of Financial Management

University Country

Jordan

Degree

Ph.D.

Degree Date

2011

English Abstract

This study develops an alternative version to capture the relationship between stock prices and the money demand.

It determines appropriate models and variables used in this study, which incorporates stock prices and money demand.

Since these variables, as well as indictors, are proxy for the stock and money markets.

These models are tested by using quarterly data from 2000 : 3 to 2009 : 4 for the target markets ; Jordan, Kuwait, Qatar and Saudi Arabia.

This procedure attempts to analyze the relationship between stock prices and demand for money and presents many macroeconomic variables employed in the conventional method and other models.

However, the results of the three estimators that analyzed multi-regression indicated that all the coefficients are significant at several levels and the best employment of the macroeconomic variables that explained the relationship between stock prices and the money demand.

In addition, this version of multi-regression estimators presented evidence that the stock prices have a highly significant effect on money demand.

There is a critical problem associated with non-stationary variables, which is the spurious correlation.

The Augmented Dickey-Fuller (ADF) test is used in this study to examine the stationary (unit-roots) of the series.

The results of this test, strongly confirm significant at 5 %, level, and that the series are not stationary in levels, but there are stationary in the first differences, or integrated of order I (1).

This study investigated the causal relationship between stock prices and money demand.

Results of the empirical study indicate that there is bi-directional causal relationship between demand for money and all stock market indices.

Johansen's co-integration test explained the effect between dependent and independent variables in the short and long run period.

The results for target markets indicate that both the trace and maximum-Eigenvalue test indicate that at least one integration at 5 % level.

In addition, the results allow us to confidently reach the conclusion, that the target markets are integrated, which means these markets long-run movements are determined when co-integration is found ; the next step is to build an Error Correction Model (ECM), using the co-integration test to supply the lagged residual.

Both parameters in (ECM) indicated a long-run equilibrium between the variables in all markets, while, statistics coefficients indicated short-run equilibrium between market variables.

The results of the co-integration tests on the unrestricted and restricted model through the maximum Eigenvalue test and trace statistics suggest that there is one significant co-integrating relationship.

All parameters of the components (GARCH) estimation are significant, and most estimators are elastic, which means the investors are investing in many options and diversity in employing their wealth.

Also, indicated a positive effect between the money and stock markets.

Finally, Stock and Watson co-integration vectors were tested by using three specifications: DOLS, DGLS and DNLLS estimators.

The results indicate that there is a stable long-run (M2) demand function, since demand for money fluctuated between elasticity and semi elasticity for all control variables used in this study.

Main Subjects

Economy and Commerce

Topics

• Economic conditions
• Prices
• Arab world

No. of Pages

133

Table of Contents

• APA
• MLA
• AMA

Language

English

Data Type

Arab Theses

Record ID

BIM-306782