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Stock market reactions to monetary policy surprises under uncertainty

Author

Listed:
  • Jonathan Benchimol

    (BoI - Bank of Israel)

  • Yossi Saadon

    (BoI - Bank of Israel)

  • Nimrod Segev

    (BoI - Bank of Israel)

Abstract

This article investigates how uncertainty impacts the effect of monetary policy surprises on stock returns. Using high-frequency US data, we demonstrate that stock markets respond more aggressively to monetary policy surprises during periods of high uncertainty. We also show that uncertainty asymmetrically influences the transmission of positive and negative monetary policy surprises to stock market prices. The amplifying effect of uncertainty is found to be stronger for expansionary shocks than for contractionary shocks. Our robustness analysis confirms that financial uncertainty has a significant role in shaping the influence of monetary policy on the stock market.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jonathan Benchimol & Yossi Saadon & Nimrod Segev, 2023. "Stock market reactions to monetary policy surprises under uncertainty," Post-Print emse-04624984, HAL.
    • Handle: RePEc:hal:journl:emse-04624984
    DOI: 10.1016/j.irfa.2023.102783
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    3. Huang, Hong-Gia & Tsai, Wei-Che & Yang, J. Jimmy, 2024. "Trading activity of VIX futures and options around FOMC announcements," International Review of Financial Analysis, Elsevier, vol. 94(C).

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    More about this item

    Keywords

    Monetary policy; Uncertainty; Stock returns; High-frequency data; Event study;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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