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When the Fed Sneezes, What Stock Market Catches the Cold?

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  • Carlo Rosa

Abstract

This paper identifies three indicators of monetary policy surprises—unexpected changes in the federal funds rate, forward guidance and large‐scale asset purchases—and examines their effects on international stock prices using an intraday event study approach. Both US and international equity indexes respond significantly to all three types of monetary surprises, with international stock returns more sensitive than US stocks. Announcement drifts ahead of Federal Open Market Committee (FOMC) meetings are also stronger internationally. While international stocks are more volatile, adjusting for volatility or beta does not fully explain their excess sensitivity. FOMC announcement effects become mostly insignificant when measuring stock returns in local currency and including S&P 500 exposure, highlighting the role of exchange rate passthrough and US market linkages in global monetary transmission.

Suggested Citation

  • Carlo Rosa, 2026. "When the Fed Sneezes, What Stock Market Catches the Cold?," International Finance, Wiley Blackwell, vol. 29(2), pages 332-349, July.
    • Handle: RePEc:bla:intfin:v:29:y:2026:i:2:p:332-349
    DOI: 10.1111/infi.70024
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