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Monetary policy and stock valuation: Structural VAR identification and size effects

Kontonikas, A and Zekaite, Z (2018) 'Monetary policy and stock valuation: Structural VAR identification and size effects.' Quantitative Finance, 18 (5). 837 - 848. ISSN 1469-7688

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Abstract

This paper examines the relationship between the US monetary policy and stock valuation using a structural VAR framework that allows for the simultaneous interaction between the federal funds rate and stock market developments based on the assumption of long-run monetary neutrality. The results confirm a strong, negative and significant monetary policy tightening effect on real stock prices. Furthermore, we provide evidence consistent with a delayed response of small stocks to monetary policy shocks relative to large stocks.

Item Type: Article
Uncontrolled Keywords: Monetary policy, Stock market, Size effect, SVAR
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 08 Dec 2017 11:57
Last Modified: 23 Jul 2019 01:00
URI: http://repository.essex.ac.uk/id/eprint/20763

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