Fearing the Fed: How Wall Street Reads Main Street

Law, Tzuo Hann; Song, Dongho; Yaron, Amir

doi:10.2139/ssrn.3092629

Cited by 18 publications

(18 citation statements)

References 44 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In line with this model prediction, we confirm that during the height of the financial crisis (defined as October 2008 through December 2009), stock returns on FOMC dates were fifty percent more volatile than in the rest of our sample even though Federal Funds rate surprises and breakeven changes were no more volatile. 19 The model prediction of greater stock return sensitivity to announcements during recessions is also consistent with the empirical evidence from macroeconomic announcements by Law, Song, and Yaron (2019).…”

Section: Model Stock Returns Around Monetary Policy Newssupporting

confidence: 64%

Why Does the Fed Move Markets so Much? A Model of Monetary Policy and Time-Varying Risk Aversion

Pflueger

Rinaldi

2020

SSRN Journal

View full text Add to dashboard Cite

meeting 2020 for valuable comments. The paper was previously circulated under the title "A Finance-Integrated New Keynesian Model." The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

show abstract

Section: Model Stock Returns Around Monetary Policy Newssupporting

confidence: 64%

Why Does the Fed Move Markets so Much? A Model of Monetary Policy and Time-Varying Risk Aversion

Pflueger

Rinaldi

2020

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…For the news variables considered in this study, Beber and Brandt () demonstrate that negative (positive) surprises are typically associated with positive (negative) jumps in Treasury bond price returns. In contrast, Law, Song, and Yaron () show that positive (negative) news surprises are good (bad) announcements for the stock market. As such, we define a negative news surprise from Equation as good news for Treasury securities but bad news for the stock market, and a positive news surprise as bad news for Treasury securities but good news for the stock market.…”

Section: Resultsmentioning

confidence: 94%

Volatility jumps and macroeconomic news announcements

Chan

Gray

2018

Journal of Futures Markets

View full text Add to dashboard Cite

While prior literature documents a link between macroeconomic news and price jumps, this paper demonstrates two channels through which economic announcements also manifest in volatility jumps. First, there is a strong coincidence of volatility jumps with scheduled announcements. Second, the mean jump size is an asymmetric function of the news surprise, with bad news resulting in larger jumps than good news. Furthermore, realized volatility (RV) and option‐implied volatility (IV) behave very differently over the days surrounding announcements. RV increases sharply on announcement days, while IV tends to decline consistent with the resolution of heightened uncertainty embedded in option prices.

show abstract

“…The response of stock prices to monetary policy news (e.g, Bernanke andKuttner, 2005, Rigobon andSack, 2004) or macroeconomic news more generally (e.g., Law, Song, and Yaron, 2017) is well explored in the literature. However, the relation is typically analyzed by the immediate response of stock prices within a narrow window around news releases.…”

Section: Introductionmentioning

confidence: 99%

The Time-Varying Effect of Monetary Policy on Asset Prices

Paul

2019

ERWP

View full text Add to dashboard Cite

This paper studies how monetary policy jointly affects asset prices and the real economy in the United States. To this end, I develop an estimator that uses high-frequency surprises as a proxy for the structural monetary policy shocks. This is achieved by integrating the surprises into a vector autoregressive model as an exogenous variable.I show analytically that this approach identifies the true relative impulse responses.When allowing for time-varying model parameters, I find that, compared to output, the response of stock and house prices to monetary policy shocks was particularly low before the 2007-09 financial crisis.

show abstract

Fearing the Fed: How Wall Street Reads Main Street

Cited by 18 publications

References 44 publications

Why Does the Fed Move Markets so Much? A Model of Monetary Policy and Time-Varying Risk Aversion

Why Does the Fed Move Markets so Much? A Model of Monetary Policy and Time-Varying Risk Aversion

Volatility jumps and macroeconomic news announcements

The Time-Varying Effect of Monetary Policy on Asset Prices

Contact Info

Product

Resources

About