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Monetary policy and stock returns under the MPC and inflation targeting

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  • Chortareas, Georgios
  • Noikokyris, Emmanouil

Abstract

We examine the implications of the Monetary Policy Committee (MPC) framework for the monetary policy–equity returns relationship in the UK. Using a standard event study methodology, we do not find a significant relationship between market-based policy surprises and equity returns. After controlling for joint response bias using Thornton's (in press) framework, we find that unexpected policy rate changes enter the stock prices discovery process. Moreover, we produce evidence that the impact of MPC policy decisions on equities depends on the MPC members' voting record publication, especially when the last reveals unanimity versus dissent voting.

Suggested Citation

  • Chortareas, Georgios & Noikokyris, Emmanouil, 2014. "Monetary policy and stock returns under the MPC and inflation targeting," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 109-116.
  • Handle: RePEc:eee:finana:v:31:y:2014:i:c:p:109-116
    DOI: 10.1016/j.irfa.2013.10.008
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    Cited by:

    1. Diouf, Ibrahima & Pépin, Dominique, 2017. "Gender and central banking," Economic Modelling, Elsevier, vol. 61(C), pages 193-206.

    More about this item

    Keywords

    Stock market returns; Monetary policy announcements; MPC framework; Central bank transparency;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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