Stock market reactions to monetary policy surprises under uncertainty

Jonathan Benchimol; Yossi Saadon; Nimrod Segev

doi:10.1016/j.irfa.2023.102783

Stock market reactions to monetary policy surprises under uncertainty

Jonathan Benchimol
, Yossi Saadon
, Nimrod Segev

Research output: Contribution to journal › Article › peer-review

21 Scopus citations

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.

Original language	English
Article number	102783
Journal	International Review of Financial Analysis
Volume	89
DOIs	https://doi.org/10.1016/j.irfa.2023.102783
State	Published - 1 Oct 2023
Externally published	Yes

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 17 Partnerships for the Goals

Keywords

Event study
High-frequency data
Monetary policy
Stock returns
Uncertainty

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.irfa.2023.102783

Cite this

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title = "Stock market reactions to monetary policy surprises under uncertainty",

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.",

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author = "Jonathan Benchimol and Yossi Saadon and Nimrod Segev",

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AU - Saadon, Yossi

AU - Segev, Nimrod

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N2 - 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.

AB - 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.

KW - Event study

KW - High-frequency data

KW - Monetary policy

KW - Stock returns

KW - Uncertainty

UR - https://www.scopus.com/pages/publications/85165339192

U2 - 10.1016/j.irfa.2023.102783

DO - 10.1016/j.irfa.2023.102783

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SN - 1057-5219

VL - 89

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

M1 - 102783

ER -

Stock market reactions to monetary policy surprises under uncertainty

Abstract

UN SDGs

Keywords

ASJC Scopus subject areas

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