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The high-frequency asymmetric response of stock returns to monetary policy for high oil price events

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  • Tsai, Chun-Li

Abstract

This paper investigates whether a high oil price event that worsens the quality of a firm's balance sheet in turn provides an additional transmission channel to the stock market, which then affects stock returns. We examine the asymmetric impacts of monetary shocks on stock returns across high oil price events and non-high oil price events over the period from 1995 to 2008. We ask how these impacts respond to the relative ability of firms to obtain external finance. Our findings suggest that more energy-intensive industries and durable-goods industries react more significantly to monetary shocks based on high oil price events than on those based on non-high oil price events. By controlling for the capacity for external finance, the intraday windows reveal that a monetary surprise for the high oil price events has a bigger impact on stock returns than for the non-high oil price events. Firms with financing constraints find that the adverse impact of a surprise monetary policy action on high oil price events is amplified in the medium profitability category, while the impact of a surprise monetary policy action on non-high oil price events is amplified in the lowest profitability category.

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  • Tsai, Chun-Li, 2013. "The high-frequency asymmetric response of stock returns to monetary policy for high oil price events," Energy Economics, Elsevier, vol. 36(C), pages 166-176.
    • Handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:166-176
    DOI: 10.1016/j.eneco.2012.12.009
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    More about this item

    Keywords

    High oil price events; Asymmetric impacts of monetary shocks; Financing constraints;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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