What does unconventional monetary policy do to stock markets in the euro area?

Chebbi, Tarek

doi:10.1002/ijfe.1669

Cited by 19 publications

(16 citation statements)

References 58 publications

(114 reference statements)

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“…Although the effect of various monetary policies for real sector variables has been widely studied by macroeconomists, the finance literature has regained its interest right after the 2008 crisis (Antonakakis, Chatziantoniou, & Filis, 2013; Chebbi, 2018; Martins, Batista, & Ferreira‐Lopes, 2018). Moreover, while the literature on the relationship between investor sentiment and asset returns has been growing (see Kumar & Lee, 2006; Lee, Shleifer, & Thaler, 1991), empirical research on the relationship between investor sentiment and monetary policy uncertainty has still gaps to fill.…”

Section: Introductionmentioning

confidence: 99%

Monetary policy uncertainty, investor sentiment, and US stock market performance: New evidence from nonlinear cointegration analysis

2020

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The purpose of this paper is to examine non‐linear and cointegrating relationships between monetary policy uncertainty, investor sentiment, and stock market for the US economy, via controlling for potential macroeconomic risk factors. We mainly utilize non‐linear autoregressive distributed lag (NARDL) approach and findings support an existing cointegration between the aforementioned variables. Our results also suggest that there is a bidirectional and negative relationship between US stock market performance and monetary policy uncertainty in the short‐run. Furthermore, the effect of monetary policy uncertainty on investor sentiment is significantly negative and not strongly asymmetric in the long‐run. On the other hand, in the short‐run, increasing investor sensitivity to macroeconomic shocks strongly increases monetary policy uncertainty, while reducing sensitivity does not have a significant impact on the monetary policy uncertainty. Finally, we find a positive and bi‐directional relationship between stock prices and investor sentiment both in the short‐ and long‐run. In the long‐run, decreasing investor sensitivity to macroeconomic fluctuations (becoming more optimistic) has a greater positive influence on stock prices than a negative influence on stock prices, since investors are becoming more pessimistic. Implications from our analysis are important to policy makers and investors for determining effective economic policy decisions and proper investment strategies.

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Section: Introductionmentioning

confidence: 99%

Monetary policy uncertainty, investor sentiment, and US stock market performance: New evidence from nonlinear cointegration analysis

2020

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“…More specifically, they were restricted to slight purchases of covered securities and reluctant and temporary purchases of stressed government bonds under the SMP, and an announced OMT programme without any purchases still activated. Finally, the findings in Haitsma, Unalmis, and de Haan (2016) and more recently Chebbi (2019) documented a strong response of euro area stock prices to unconventional monetary actions announced and implemented by the ECB. They show also that a positive monetary policy leads to a boost in stock prices.…”

Section: Empirical Analysismentioning

confidence: 92%

The response of precious metal futures markets to unconventional monetary surprises in the presence of uncertainty

Chebbi

2020

Int. J Fin Econ

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This article examines the relationship between the unconventional monetary policies and precious metal futures markets by employing an asymmetric conditional volatility specification. The results suggest that the Fed announcements that likely induced lower long‐term yields on average led to significant increases in the returns, while the effect of the ECB's unconventional monetary announcements is much weaker. Also, monetary policy surprises from both Fed and ECB have larger effects on gold return volatility. Moreover, while there are no asymmetric return responses to positive and negative surprises embedded in the monetary policy from the Euro zone, the return reactions of price returns to surprises in Fed's announcements exhibit asymmetry. Furthermore, our analysis shows that the volatility reactions are limited to negative surprises. Finally, we find evidence that the response of gold price changes to monetary announcements by the Fed becomes weaker in the presence of monetary policy uncertainty. We show also that the response of precious metal returns hinges on the sign of the unexpected component of Fed announcements.

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“…Bettendorf (2019) analyzed the impacts of transferring the risk of credit default in the Eurozone and their influence on the credit rating of the state. An unconventional currency policy and its influence on stock markets and credit rating in the Eurozone were addressed by Chebbi (2019). The market for corporate bonds in Europe and their influence on credit ratings was analyzed by Horny, Manganelli, and Mojon in This research study will be focused on exploring the dependency of a sovereign credit rating on macroeconomic indicators.…”

Section: Literature Reviewmentioning

confidence: 99%

The relationship between sovereign credit rating and trends of macroeconomic indicators

Kotěšovcová

Mihola

Budinský

2019

Investment Management and Financial Innovations

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The sovereign credit rating provides information about the creditworthiness of a country and thereby serves as a tool for investors in order to make right decisions concerning financial assets worth investments. Thus, determination of a sovereign credit rating is a highly complex and challenging activity. Specialized agencies are involved in rating assessment. So, it’s essential to analyze the efficiency of their work and seek out easily accessible tools for generating assessments of such ratings. The objective of this article is to find out whether sovereign credit rating can be reliably estimated using trends of selected macroeconomic indicators, despite the fact that sovereign credit rating is most likely influenced by non-economic factors. This can be used for strategic considerations at national and multinational levels. The relationships between sovereign credit rating and the trends of macroeconomic indicators were examined using statistical methods, linear multiple regression analysis, cumulative correlation coefficient, and multicollinearity test. The data source used is comprised of selected World Bank indicators meeting the conditions of completeness and representativeness. The data set has shown a cumulative correlation coefficient value greater than 95%, however at 100% multicollinearity. This is followed by the gradual elimination of indicators, but even this did not allow achieving acceptable values. So, the conclusion is that rating levels are not explainable solely by the trends of economic indicators, but other influences, e.g. political. However, the fact that the statistical model yielded acceptable results for five and fewer indicators allowed a regression equation to be found that gives good estimates of a country’s rating. This allows, for example, predicting of ratings relatively easy by forecasting the development of selected macroeconomic indicators.

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What does unconventional monetary policy do to stock markets in the euro area?

Cited by 19 publications

References 58 publications

Monetary policy uncertainty, investor sentiment, and US stock market performance: New evidence from nonlinear cointegration analysis

Monetary policy uncertainty, investor sentiment, and US stock market performance: New evidence from nonlinear cointegration analysis

The response of precious metal futures markets to unconventional monetary surprises in the presence of uncertainty

The relationship between sovereign credit rating and trends of macroeconomic indicators

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