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European Monetary Policy Surprises: The Aggregate and Sectoral Stock Market Response

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  • Bredin, Don

    (University College Dublin)

  • Hyde, Stuart

    (University of Manchester)

  • O'Reilly, Gerard

    (Central Bank and Financial Services Authority of Ireland)

Abstract

In this paper we investigate the stock market response to international monetary policy changes in the UK and Germany. Specifically, we analyse the impact of (un)expected changes in UK and German/euro area policy rates on UK and German aggregate and sectoral stock returns in an event study. The decomposition of the (un)expected changes in policy rates are based on futures markets. Overall, our results suggest that, UK monetary policy surprises have a significant negative influence on both aggregate and industry level stock returns in both the UK and Germany. The influence of German/Euro area monetary policy shocks appears insignificant for both countries.

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Bibliographic Info

Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 10/RT/05.

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Length: 25 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:cbi:wpaper:10/rt/05

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Blogs review: The Events Study methodology
    by ? in Bruegel blog on 2012-10-08 09:51:26
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Cited by:
  1. Florackis, Chris & Kostakis, Alexandros & Kontonikas, Alexandros, 2011. "Transmission of macro-liquidity shocks to liquidity-sorted stock portfolios’ returns: The role of the financial crisis," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2011-31, Scottish Institute for Research in Economics (SIRE).
  2. Pilar Abad & Helena Chuliá, 2013. "“European Government Bond Markets and Monetary Policy Surprises: Returns, Volatility and Integration”," IREA Working Papers, University of Barcelona, Research Institute of Applied Economics 201325, University of Barcelona, Research Institute of Applied Economics, revised Dec 2013.
  3. Jan Hanousek & Evžen Kočenda, 2010. "Effect of Intraday Information Flow on the Emerging European Stock Markets," Politická ekonomie, University of Economics, Prague, University of Economics, Prague, vol. 2010(4), pages 435-457.
  4. Alexandros Kontonikas & Ronald MacDonald & Aman Saggu, 2012. "Stock market reaction to fed funds rate surprises: state dependence and the financial crisis," Working Papers, Business School - Economics, University of Glasgow 2012_11, Business School - Economics, University of Glasgow.
  5. 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, Business School - Economics, University of Glasgow 2011_22, Business School - Economics, University of Glasgow, revised Apr 2011.
  6. Bredin, Don & Hyde, Stuart & Reilly, Gerard O., 2010. "Monetary policy surprises and international bond markets," Journal of International Money and Finance, Elsevier, Elsevier, vol. 29(6), pages 988-1002, October.
  7. Jan Hanousek & Evzen Kocenda, 2009. "Intraday Price Discovery in Emerging European Stock Markets," CERGE-EI Working Papers wp382, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  8. Hanousek, Jan & Kocenda, Evzen & Kutan, Ali M., 2009. "The reaction of asset prices to macroeconomic announcements in new EU markets: Evidence from intraday data," Journal of Financial Stability, Elsevier, Elsevier, vol. 5(2), pages 199-219, June.
  9. Tang, Yong & Luo, Yong & Xiong, Jie & Zhao, Fei & Zhang, Yi-Cheng, 2013. "Impact of monetary policy changes on the Chinese monetary and stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 392(19), pages 4435-4449.
  10. Guan-Ru Chen & Ming-Hung Wu, 2013. "How does Monetary Policy Influence Capital Markets? Using a Threshold Regression Model," Asia-Pacific Financial Markets, Springer, Springer, vol. 20(1), pages 31-47, March.

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