Monetary Policy and Stock Prices

Cotton, Christopher D.

doi:10.2139/ssrn.4109471

Cited by 4 publications

(6 citation statements)

References 6 publications

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“…Even though the negative relationship is not obvious in the short run, which may be due to outside policy interventions, the long-run effects are increasingly clear. While researchers like Cotton emphasize that the relationship between the interest rate and stock price occurs merely in the long term [3], this paper perceives that their relationship can be observed both in the short term and long term even if the long-term effects are more noticeable. One of the most crucial findings is that the original reaction of stock prices to the change in the interest rate can be altered by government policies or other economic factors.…”

Section: Discussionmentioning

confidence: 76%

“…Some researchers present the historical relationship between monetary policy on interest rates and stock prices. Cotton generates images of the U.S. 10-year interest rate and the S&P 500 index from 1962 to 2022, the result turns out to be the long-term interest rate and stock prices are negatively associated [3]. However, due to covid pandemic, the stock price fails to be stable from 2021-03 to 2022-02, so the distinct relationship cannot be described [3].…”

Section: Introductionmentioning

confidence: 99%

“…Cotton generates images of the U.S. 10-year interest rate and the S&P 500 index from 1962 to 2022, the result turns out to be the long-term interest rate and stock prices are negatively associated [3]. However, due to covid pandemic, the stock price fails to be stable from 2021-03 to 2022-02, so the distinct relationship cannot be described [3]. Apart from that, Cotton also points out that many other factors can change or even reverse the association between interest rates and stock prices; thus, using historical trends to draw an exact and convincing conclusion is not possible [3].…”

Section: Introductionmentioning

confidence: 99%

“…However, due to covid pandemic, the stock price fails to be stable from 2021-03 to 2022-02, so the distinct relationship cannot be described [3]. Apart from that, Cotton also points out that many other factors can change or even reverse the association between interest rates and stock prices; thus, using historical trends to draw an exact and convincing conclusion is not possible [3]. Moreover, Uddin and Alam who use data from Dhaka Stock Exchange (DSE) also prove that the stock price and interest rate in the same period are negatively related [4].…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

The Relationship Between the Negative Monetary Policy and Stock Market: Evidence from Changes in S&P 500

2024

AEMPS

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Monetary policy and stock price are two significant factors in financial markets. They can influence each other through economic variables such as the interest rate. Researchers require to understand their dynamic relationship to better analyze the market while investors should put emphasis on the two factors interaction to minimize the investment risk. This paper studies the relationship between the change in monetary policy and the stock price in the U.S. market under the background of the Federal Reserves rate hike. The researcher mainly uses the S&P 500 retrieved from the website of investing and applies the ARIMA model in Stata to estimate the fitted value of the stock price. As a result, an apparent relationship between the Federal Reserves rate hike and the stock price is observed. However, the result is slightly different from the researchers original assumption; therefore, two assumptions are presented to explain the difference. One of the most important findings of this research is that the effect of the Federal Reserves rate hike is becoming more and more obvious in the long run.

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Section: Discussionmentioning

confidence: 76%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Relationship Between the Negative Monetary Policy and Stock Market: Evidence from Changes in S&P 500

2024

AEMPS

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“…Besides, the increased expectation will produce a lower stock price. With the inflation goes up, the Federal Reserve will increase interest rate to a higher level and the stock market will meet a deeper recession [4]. Trifonova and Kolev devoted to the FED's unconventional monetary policy.…”

Section: Related Researchmentioning

confidence: 99%

What Influence Will the Raising of Interest Rates Have on the S&P 500 in the Epidemic Era?

Dai¹

2022

HBEM

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With the raising of inflation and the recession of economy, the negative effect of monetary easing policy in the era of COVID-19 has appeared gradually. The Federal Reserve increases federal funds rate constantly to reduce the inflation. However, the inflation keeps soaring and the federal funds rate keeps an upswing which result in a constant sliding in stock market. The research in this article shows that the source of the inflation is the supply imbalance. It is useless that simply increase federal funds rate which can cause an economy recession like 1981s. Finally, the research finds that the only thing human can do is to try everyone best to offer a buffering during the world recession and fast the speed of energy revolution and economy recovery which can not only estimate the stock market but also restrict the decrease of S&P 500 index urging the recovery of finance and economy.

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To What Degree and through Which Channel Do Central Banks Other Than the Federal Reserve Cause Spillovers?

Cotton

2022

SSRN Journal

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Monetary Policy and Stock Prices

Cited by 4 publications

References 6 publications

The Relationship Between the Negative Monetary Policy and Stock Market: Evidence from Changes in S&P 500

The Relationship Between the Negative Monetary Policy and Stock Market: Evidence from Changes in S&P 500

What Influence Will the Raising of Interest Rates Have on the S&P 500 in the Epidemic Era?

To What Degree and through Which Channel Do Central Banks Other Than the Federal Reserve Cause Spillovers?

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