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The Research of the Correlation Between USD Index and S&P500
- 1 IB Curriculum Center of High School Affiliated to Shanghai Jiao Tong University, Shanghai, 200438, China
* Author to whom correspondence should be addressed.
Abstract
This paper investigates existence of equilibrium relationships among the USD index and S&P500 in the long term in the United States. By applying correlation matrix analysis to daily data for the 2016:07:30–2023:08:01 period, this paper finds that there was a slight negative correlation between the USD index and the S&P 500. Basing on the Augmented Dickey-Fuller test (ADF test), this paper shows that that the correlation between the USD index and the S&P 500 is stable while vector autoregressive model (VAR model) proving that changes in the USD index can cause changes in the S&P 500 index. Firstly, using ADF test and VAR model to investigate the relationships between the USD index and A&P500, this paper reveals not only judge the negative relationship between this two, but also studying the stability of this relationship, proving the validity to explain the changes of S&P500 by the changes of the USD index. This conclusion can act as a good judging basic for US leaders to make economic decisions such as raising or lowering interest rates.
Keywords
USD index, S&P500, correlation matrix, ADF test, vector autoregressive model
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Cite this article
Zhang,T. (2024). The Research of the Correlation Between USD Index and S&P500. Advances in Economics, Management and Political Sciences,123,1-6.
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