Another Look at the Stock Return Response to Monetary Policy Actions*

Maio, Paulo F.

doi:10.1093/rof/rfs050

Cited by 85 publications

(54 citation statements)

References 112 publications

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“…Our results are similar to Kontonikas (2006), Taboga (2009), Mustafa, et al (2013), Maio (2014) and. The results of VAR also suggest this impact to be true among stock market and bond market with monetary policy components.…”

Section: Resultssupporting

confidence: 93%

“…It can be concluded that many studies have found that the monetary transmission mechanism is rapid and effective (Taboga, 2009). However, many other studies (Edelberg, and Marshall, 1996;Gourio, 2013;and Maio, 2014) have observed that the impact of monetary policy interest rates on market interest rates is uncertain both in developed and developing economies. Therefore, it generates the need to examine the impact monetary policy on asset prices in the context of developed and developing economies.…”

Section: Introductionmentioning

confidence: 99%

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Monetary Policy and Financial Asset Prices: Empirical Evidence from Pakistan

et al. 2018

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Monetary transmission mechanism assumed to be significantly influenced by the effect of policy decisions on financial markets. However, various previous studies have come up with different outcomes. The purpose of this study is to examine the impact of monetary policy on different asset classes (shares and bonds) in Pakistan. This study using stock price and bond yield as dependent variable and discount rate, money supply, inflation, and exchange rate are independent variables. Data of all variables have collected from 2010 to 2016, and Vector Autoregressive (VAR) technique has applied. The empirical results indicate that there is an impact of monetary policy components on both stock and bond market as an increase in policy rate causes decline in stocks prices and bonds yields. The findings of this study will help the potential investors in making long-term (in general) and short-term (in particular) investment strategies concerning monetary policy.DOI: 10.15408/sjie.v7i2.7099

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Section: Resultssupporting

confidence: 93%

Section: Introductionmentioning

confidence: 99%

Monetary Policy and Financial Asset Prices: Empirical Evidence from Pakistan

et al. 2018

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“…The aforementioned system of equations is estimated at an equationby-equation basis using Ordinary Least Squares (OLS) as in Maio (2014). 11 See Table C2 in the Supporting Information for a list of the relevant announcements by the Fed.…”

Section: Discussionmentioning

confidence: 99%

Treasuries variance decomposition and the impact of monetary policy

et al. 2019

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This paper investigates the effect of monetary policy shifts on Treasuries over the last three decades. We decompose unexpected excess returns on 2‐, 5‐, and 10‐year Treasuries in three components related to revisions in expectations (news) about future excess returns, inflation, and real interest rates. We evaluate the impact of conventional and unconventional monetary policy shocks on returns and their components. Our results indicate that expansionary monetary policy shocks are associated with declining inflation expectations and higher Treasuries' returns.

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“…In particular, we consider two interest rates series (the change in the Federal Funds rate and the 10-year to 3-month government bond term structure), a measure of output, inflation and the money supply. Following, for example, Thorbecke (1997), Rigobon and Sack (2004), Bernanke and Kuttner (2005) and Maio (2014) there is believed to be a negative relation between changes in the Federal funds rate and stock returns. Regarding the term structure, an increase in its value is consistent with higher expected future inflation and a monetary tightening.…”

Section: Data Choice and Motivationmentioning

confidence: 99%

Stock Return Predictability: The Role of Inflation and Threshold Dynamics

McMillan

2016

SSRN Journal

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This paper argues that the nature of stock return predictability varies with the level of inflation. We contend that the nature of relations between economic variables and returns differs according to the level of inflation, due to different economic risk implications. An increase in low level inflation may signal improving economic conditions and lower expected returns, while the opposite is true with an equal rise in high level inflation. Linear estimation provides contradictory coefficient values, which we argue arises from mixing coefficient values across regimes. We test for and estimate threshold models with inflation and the term structure as the threshold variable. These models reveal a change in either the sign or magnitude of the parameter values across the regimes such that the relation between stock returns and economic variables is not constant. Measures of in-sample fit and a forecast exercise support the threshold models. They produce a higher adjusted R-squared, lower MAE and RMSE and higher trading related measures. These results help explain the lack of consistent empirical evidence in favour of stock return predictability and should be of interest to those engaged in stock market modelling as well as trading and portfolio management.

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Another Look at the Stock Return Response to Monetary Policy Actions*

Cited by 85 publications

References 112 publications

Monetary Policy and Financial Asset Prices: Empirical Evidence from Pakistan

Monetary Policy and Financial Asset Prices: Empirical Evidence from Pakistan

Treasuries variance decomposition and the impact of monetary policy

Stock Return Predictability: The Role of Inflation and Threshold Dynamics

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