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The impact of conventional and unconventional monetary policy on investor sentiment

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  • Lutz, Chandler

Abstract

This paper examines the relationship between monetary policy and investor sentiment across conventional and unconventional monetary policy regimes. During conventional times, we find that a surprise decrease in the fed funds rate leads to a large increase in investor sentiment. Similarly, when the fed funds rate is at its zero lower bound, research results indicate that expansionary unconventional monetary policy shocks also have a large and positive impact on investor mood. Together, our findings highlight the importance of both conventional and unconventional monetary policy in the determination of investor sentiment.

Suggested Citation

  • Lutz, Chandler, 2015. "The impact of conventional and unconventional monetary policy on investor sentiment," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 89-105.
  • Handle: RePEc:eee:jbfina:v:61:y:2015:i:c:p:89-105
    DOI: 10.1016/j.jbankfin.2015.08.019
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    More about this item

    Keywords

    Monetary policy; Unconventional monetary policy; Investor sentiment;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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