Stock and Bond Market Sensitivities to Monetary Variables
AbstractThis note examines the impact of interest rate and money shocks on Euro Area and U.S. financial markets. More specifically, a dynamic Gordon model is developed for stock and bond returns, which allows for a decomposition in fundamental factors. It is found that the impact of official interest rate shocks on financial markets is stronger and more significant than that of money shocks. The Euro Area betas are larger for stocks than bonds, while the opposite is true for U.S. betas.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 680.
Date of creation: 2001
Date of revision:
Monetary policy shocks; dynamic Gordon model; return decomposition; betas;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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