Long-Term Equilibrium Relationship between the Prime Rate and the S&P 500 Index

Asim Ghosh ； Robert Boldin

《Advances in Investment Analysis and Portfolio Management》 2期 (2006/11) Pp. 17-25

https://doi.org/10.6291/AIAPM.2006.02.02

並列摘要

This study investigates whether the prime rate has a long-run equilibrium relationship with the stock market by applying the theory of cointegration. The empirical evidence suggests that the prime rate is cointegrated with the stock market as represented by the S&P 500 index during the time period investigated. The appropriate error correction model is estimated which is used to perform out-of-sample forecasting. Performance of the error correction model is compared with that of a naïve model in terms of RMSE and is found to be informative.

並列關鍵字

Prime Rate ； S&P 500 Index ； Cointegration

參考文獻

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