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The target cash rate and its impact on investment asset returns in Australia

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  • Jenny Diggle
  • Robert Brooks

Abstract

This article examines the relationship between asset returns and changes in the announced target cash rate of the Reserve Bank of Australia during the period from September 1990 to June 2000. Using a two stage least squares model adapted from Lowe (1995) the analysis found that there is an impact on property returns during the month of the announced change in the cash rate. This finding is not supported for other sub-indices on the Australian stock exchange, apart from Tourism and Leisure where there is also an identifiable impact.

Suggested Citation

  • Jenny Diggle & Robert Brooks, 2007. "The target cash rate and its impact on investment asset returns in Australia," Applied Financial Economics, Taylor & Francis Journals, vol. 17(8), pages 615-633.
    • Handle: RePEc:taf:apfiec:v:17:y:2007:i:8:p:615-633
    DOI: 10.1080/09603100701243503
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    References listed on IDEAS

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    1. Bob Rankin, 1992. "The Cash Market in Australia," RBA Research Discussion Papers rdp9214, Reserve Bank of Australia.
    2. Philip Lowe, 1995. "The Link between the Cash Rate and Market Interest Rates," RBA Research Discussion Papers rdp9504, Reserve Bank of Australia.
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    Cited by:

    1. Kim, Suk-Joong & Nguyen, Do Quoc Tho, 2008. "The reaction of the Australian financial markets to the interest rate news from the Reserve Bank of Australia and the U.S. Fed," Research in International Business and Finance, Elsevier, vol. 22(3), pages 378-395, September.
    2. Kakhkharov, Jakhongir & Bianchi, Robert J., 2022. "COVID-19 and policy responses: Early evidence in banks and FinTech stocks," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    3. Alexandra Brown & Sigitas Karpavičius, 2017. "The Reaction of the Australian Stock Market to Monetary Policy Announcements from the Reserve Bank of Australia," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 20-41, March.

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