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Stock Market's Reaction to Monetary Policy Announcements in India

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  • Sasidharan, Anand

Abstract

The paper examines stock market behaviour on days preceding and succeeding the announcement of a change in the monetary policy stance. Market's plausible reactions are tested using nonparametric statistics. The tests reveals that there is no systematic pattern in its reaction, neither towards the type of policy stance (expansionary or contractionary), nor during the days corresponding to the `event'.

Suggested Citation

  • Sasidharan, Anand, 2009. "Stock Market's Reaction to Monetary Policy Announcements in India," MPRA Paper 24190, University Library of Munich, Germany, revised Jul 2010.
    • Handle: RePEc:pra:mprapa:24190
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    File URL: https://mpra.ub.uni-muenchen.de/24190/1/MPRA_paper_24190.pdf
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    References listed on IDEAS

    as
    1. Ben S. Bernanke & Kenneth N. Kuttner, 2005. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," Journal of Finance, American Finance Association, vol. 60(3), pages 1221-1257, June.
    2. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June.
    3. Ehrmann, Michael & Fratzscher, Marcel, 2004. "Taking stock: monetary policy transmission to equity markets," Working Paper Series 354, European Central Bank.
    4. Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
    5. Mark Gertler & Simon Gilchrist, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 309-340.
    6. Thorbecke, Willem, 1997. "On Stock Market Returns and Monetary Policy," Journal of Finance, American Finance Association, vol. 52(2), pages 635-654, June.
    7. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    8. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    9. Lobo, Bento J, 2000. "Asymmetric Effects of Interest Rate Changes on Stock Prices," The Financial Review, Eastern Finance Association, vol. 35(3), pages 125-143, August.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. A. Edwin Prabu & Indranil Bhattacharyya & Partha Ray, 2020. "Impact of monetary policy on the Indian stock market: Does the devil lie in the detail?," Indian Economic Review, Springer, vol. 55(1), pages 27-50, June.

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    More about this item

    Keywords

    Monetary Policy; Stock Market; Event Study; Semi-strong Efficiency; EMH; Stock Market Efficiency; Non parametric; Indian Stock Market;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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