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Does US Monetary Policy Affect Stock Market Behaviour Under Extreme Market Conditions? Evidence from COVID-19

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  • Kilic, Erdem

    (Turkish-German University, Istanbul, Turkiye)

  • Sönmezer, Sitki

    (Istanbul Ticaret University, Istanbul, Turkiye)

Abstract

We examine the short-term impact of Federal Open Market Committee (FOMC) announcements on technology stocks behavior. Using a modified continuous-time simulation model, we analyze high-frequency data for nine representative stocks from July 2019 to January 2021, covering ten FOMC announcement dates and the outbreak of COVID-19. High-frequency data provides more insight than lower frequent data. These insights enabled us to analyze the volatilities with higher incisiveness. Our results show differences in price jump patterns between mega-cap and second-tier large-cap stocks, varying degrees of noise dominance, and the presence of Brownian motion. Specifically, FOMC announcements increase market volatility and impact stock prices in different ways. Mega-cap stocks that are already financially strong appear to be less sensitive to interest rate increases than their smaller counterparts that rely on external financing.

Suggested Citation

  • Kilic, Erdem & Sönmezer, Sitki, 2025. "Does US Monetary Policy Affect Stock Market Behaviour Under Extreme Market Conditions? Evidence from COVID-19," International Journal of Economics and Financial Issues, Econjournals, vol. 15(3), pages 18-28, April.
    • Handle: RePEc:eco:journ1:v:15:y:2025:i:3:id:18286
    DOI: 10.32479/ijefi.18286
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