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Monetary policy shocks and stock returns: evidence from the British market

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Author Info

  • A. Gregoriou
  • A. Kontonikas

    ()

  • R. MacDonald
  • A. Montagnoli

Abstract

This paper examines the impact of anticipated and unanticipated monetary policy announcements, of the Bank of England’s Monetary Policy Committee on UK sectoral stock returns. The monetary policy shock is generated from the change in the three-month sterling LIBOR futures contract. Using a panel GMM estimator we find that both the expected and unexpected components of monetary changes are significant, but that only the surprise term is significant when we control for the impact of the sectors financial position

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File URL: http://hdl.handle.net/10.1007/s11408-009-0113-2
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Bibliographic Info

Article provided by Springer in its journal Financial Markets and Portfolio Management.

Volume (Year): 23 (2009)
Issue (Month): 4 (December)
Pages: 401-410

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Handle: RePEc:kap:fmktpm:v:23:y:2009:i:4:p:401-410

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Web page: http://www.springerlink.com/link.asp?id=119763

Related research

Keywords: Asset prices; Monetary policy; Panel data; C33; E44; E52; G13;

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References

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  1. Peter Lildholdt & Anne Vila-Wetherilt, 2004. "Anticipation Of Monetary Policy In UK Financial Markets," Royal Economic Society Annual Conference 2004 20, Royal Economic Society.
  2. Ben Bernanke & Kenneth N. Kuttner, 2003. "What explains the stock market's reaction to Federal Reserve policy?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  3. 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.
  4. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  5. Saeed Akbar & Andrew W. Stark, 2003. "Deflators, Net Shareholder Cash Flows, Dividends, Capital Contributions and Estimated Models of Corporate Valuation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(9-10), pages 1211-1233.
  6. Ernst Konrad, 2009. "The impact of monetary policy surprises on asset return volatility: the case of Germany," Financial Markets and Portfolio Management, Springer, vol. 23(2), pages 111-135, June.
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Citations

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Cited by:
  1. Alexandros Kontonikas & Ronald MacDonald & Aman Saggu, 2012. "Stock market reaction to fed funds rate surprises: state dependence and the financial crisis," Working Papers 2012_11, Business School - Economics, University of Glasgow.
  2. Chris Florackis & Alexandros Kontonikas & Alexandros Kostakis, 2010. "Transmission of macro-liquidity shocks to liquidity-sorted stock portfolios’ returns: The role of the financial crisis," Working Papers 2011_22, Business School - Economics, University of Glasgow, revised Apr 2011.
  3. Papadamou, Stephanos & Siriopoulos, Costas, 2014. "Interest rate risk and the creation of the Monetary Policy Committee: Evidence from banks’ and life insurance companies’ stocks in the UK," Journal of Economics and Business, Elsevier, vol. 71(C), pages 45-67.
  4. Abdul Qayyum & Saba Anwa, 2010. "Impact of monetary policy on the volatility of stock market in pakistan," Economics Bulletin, AccessEcon, vol. 30(4), pages A28.
  5. Chortareas, Georgios & Noikokyris, Emmanouil, 2014. "Monetary policy and stock returns under the MPC and inflation targeting," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 109-116.
  6. Habib Rahman & Hasan Mohsin, 2011. "Monetary Policy Announcements and Stock Returns: Evidence from the Pakistani Market," Transition Studies Review, Springer, vol. 18(2), pages 342-360, December.
  7. Mohammed Bouaddi & Abderrahim Taamouti, 2012. "Portfolio risk management in a data-rich environment," Financial Markets and Portfolio Management, Springer, vol. 26(4), pages 469-494, December.
  8. Chris Florackis & Alexandros Kontonikas & Alexandros Kostakis‌, . "Stock market liquidity and macro-liquidity shocks: Evidence from the 2007-2009 financial crisis," Working Papers 2013_13, Business School - Economics, University of Glasgow.

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