Can the Fed Talk the Hind Legs Off the Stock Market?
43 Pages Posted: 25 Jun 2011
There are 3 versions of this paper
Can the Fed Talk the Hind Legs Off the Stock Market?
Can the Fed Talk the Hind Legs Off the Stock Market?
Date Written: June 2011
Abstract
Deliberately or not, by providing its stance on the prospects of the economy, rationalizing past decisions or announcing future actions, central banks influence financial markets' expectations of its future policy. In bad times, monetary policy communication inducing an upward revision of the path of future policy is good news for stocks. During an expansion the effect is weak and on average negative. The response of equities to central bank talk depends critically on the business cycle. There are strong industry specific effects of monetary policy actions and communication. These industry effects relate to the variation in cyclicality of different industries. Firm-specific effects of monetary policy relate to the leverage, the size and the price-earnings ratio of firms.
Keywords: business cycle, credit channel, monetary policy, monetary policy announcements, stock market
JEL Classification: E44, E52, G14
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Monetary Policy Surprises and Interest Rates: Evidence from the Fed Funds Futures Market
-
Monetary Policy Surprises and Interest Rates: Evidence from the Fed Funds Futures Markets
-
What Explains the Stock Market's Reaction to Federal Reserve Policy?
-
What Explains the Stock Market's Reaction to Federal Reserve Policy?
-
The Effect of Changes in the Federal Funds Rate Target on Market Interest Rates in the 1970s
By Timothy Cook and Thomas K. Hahn
-
The Impact of Monetary Policy on Asset Prices
By Brian P. Sack and Roberto Rigobon
-
The Impact of Monetary Policy on Asset Prices
By Brian P. Sack and Roberto Rigobon
-
Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets
By Torben G. Andersen, Clara Vega, ...
-
Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets
By Torben G. Andersen, Clara Vega, ...
-
Real-Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets
By Torben G. Andersen, Clara Vega, ...