Unconventional Monetary Policy, Media Uncertainty, and Expected Stock Market Volatility

43 Pages Posted: 6 Jun 2014 Last revised: 24 Jul 2014

See all articles by Chandler Lutz

Chandler Lutz

Securities and Exchange Commission

Date Written: July 21, 2014

Abstract

This paper investigates the relationship between unconventional monetary policy, media uncertainty, and expected stock market volatility. We find that (1) expansionary unconventional monetary policy shocks induce higher media uncertainty as news reports aim to describe the uncertain economic environment leading up to these monetary policy events; and (2) that expansionary unconventional monetary shocks, when coupled with higher media uncertainty, lead to higher subsequent realizations of expected stock market volatility. These effects, which are asymmetric across the different rounds of the Federal Reserve's Quantitative Easing program, then reverse after several days in line with a behavioral interpretation of the results.

Keywords: Unconventional Monetary Policy, Uncertainty

JEL Classification: E52, G02

Suggested Citation

Lutz, Chandler, Unconventional Monetary Policy, Media Uncertainty, and Expected Stock Market Volatility (July 21, 2014). Available at SSRN: https://ssrn.com/abstract=2446536 or http://dx.doi.org/10.2139/ssrn.2446536

Chandler Lutz (Contact Author)

Securities and Exchange Commission ( email )

100 F Street, NE
Washington, DC 20549
United States

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