The Correlation Research Between Gold Market And Stock Matket Under The U.S. QE

In2007, the global economy suffered a crash which caused by the U.S.subprime mortgage crisis. To get rid of the recession as quickly as possible, the world’s major economies have made lots of policy to get the situation become better. However, since the normal policy effect is not significant, the major economies represented by the Fed began to implement a long-term low interest rate policy and buy their bonds and other long-term bonds to increase the market liquidity. Such unconventional monetary policy known as quantitative easing monetary policy. The effect is obvious. Firstly, the exsupply U.S. dollar not only affect all kinds of domestic asset prices, it also brings a major fluctuations in global commodity prices. Secondly, volatility effects of financial markets is also effect the global interest rate markets and capital flows. The main purpose of this paper is to consider after the first QE, what changes will occur in the relationship between London international gold market and the S&P500index. The remainder of this paper is organized as follow.Firstly, the Literature review is divided into three parts, including correlation between stock market and gold market, the impact of monetary policy on the two markets and summary on empirical methods. Secondly,in this paper,we not only describe the Fed’s quantitative easing monetary policy, but also analyze the situation of recent investment in gold and stocks market. In this paper, we apply copulas to investigate whether a correlation change existed between stock market and gold market after the U.S. QE. Using the S&P500index, the london international gold market returns,evidence was found for a signification increasing dependence between stock market and gold market after the first QE,thus supporting the existence of change. Moreover, increased tail dependence and symmetry characterize all the paired markets.This maybe indicates that significant increases in tail dependence are an actual dimension of the contagion phenomenon and that gold and stock prices are linked to the same degree regardless of whether markets are booming or crashing during the sample period. The empirical results have potentially important implications for risk management and policy make.