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European monetary policy surprises: the aggregate and sectoral stock market response

Author Info

Listed author(s):
  • Don Bredin

    (University College Dublin, Ireland)

  • Stuart Hyde

    (University of Manchester, UK)

  • Dirk Nitzsche

    (City University, UK)

  • Gerard O'Reilly

    (CBSFAI, Ireland)

Abstract

In this paper we investigate the stock market response to international monetary policy changes in the UK and Germany. Specifically, we analyse the impact of (un)expected changes in the UK and German|Euro area policy rates on the UK and German aggregate and sectoral equity returns in an event study. The decomposition of (un)expected changes in policy rates is based on futures markets. Overall, our results suggest that, the UK monetary policy surprises have a significant negative influence on both aggregate and industry level returns in both countries. The influence of German|Euro area monetary policy shocks appears insignificant for both Germany and the UK. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.341
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 14 (2009)
Issue (Month): 2 ()
Pages: 156-171

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Handle: RePEc:ijf:ijfiec:v:14:y:2009:i:2:p:156-171
DOI: 10.1002/ijfe.341
Contact details of provider: Web page: http://www.interscience.wiley.com/jpages/1076-9307/

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Blogs review: The Events Study methodology
    by ? in Bruegel blog on 2012-10-08 09:51:26
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:

  1. Kronick, Jeremy, 2014. "Monetary Policy Shocks from the EU and US: Implications for Sub-Saharan Africa," MPRA Paper 59416, University Library of Munich, Germany.
  2. Bredin, Don & Hyde, Stuart & Reilly, Gerard O., 2010. "Monetary policy surprises and international bond markets," Journal of International Money and Finance, Elsevier, vol. 29(6), pages 988-1002, October.
  3. Florackis, Chris & Kostakis, Alexandros & Kontonikas, Alexandros, 2011. "Transmission of macro-liquidity shocks to liquidity-sorted stock portfolios’ returns: The role of the financial crisis," SIRE Discussion Papers 2011-31, Scottish Institute for Research in Economics (SIRE).
  4. Guan-Ru Chen & Ming-Hung Wu, 2013. "How does Monetary Policy Influence Capital Markets? Using a Threshold Regression Model," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 20(1), pages 31-47, March.
  5. Pilar Abad & Helena Chuliá, 2013. "“European Government Bond Markets and Monetary Policy Surprises: Returns, Volatility and Integration”," IREA Working Papers 201325, University of Barcelona, Research Institute of Applied Economics, revised Dec 2013.
  6. Chris Florackis & Alexandros Kontonikas & Alexandros Kostakis, 2010. "Transmission of macro-liquidity shocks to liquidity-sorted stock portfolios’ returns: The role of the financial crisis," Working Papers 2011_22, Business School - Economics, University of Glasgow, revised Apr 2011.
  7. Nave, Juan M. & Ruiz, Javier, 2015. "Risk aversion and monetary policy in a global context," Journal of Financial Stability, Elsevier, vol. 20(C), pages 14-35.
  8. Hanousek, Jan & Kocenda, Evzen & Kutan, Ali M., 2009. "The reaction of asset prices to macroeconomic announcements in new EU markets: Evidence from intraday data," Journal of Financial Stability, Elsevier, vol. 5(2), pages 199-219, June.
  9. Haitsma, Reinder & Unalmis, Deren & de Haan, Jakob, 2016. "The impact of the ECB's conventional and unconventional monetary policies on stock markets," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 101-116.
  10. Zulkefly Abdul Karim & Mohd Azlan Shah Zaidi, 2015. "Monetary Policy, Firm Size and Equity Returns in An Emerging Market: Panel Evidence of Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 29-55.
  11. Jan Hanousek & Evžen Kočenda, 2011. "Foreign News and Spillovers in Emerging European Stock Markets," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 170-188, 02.
  12. Tang, Yong & Luo, Yong & Xiong, Jie & Zhao, Fei & Zhang, Yi-Cheng, 2013. "Impact of monetary policy changes on the Chinese monetary and stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4435-4449.
  13. Chatziantoniou, Ioannis & Duffy, David & Filis, George, 2013. "Stock market response to monetary and fiscal policy shocks: Multi-country evidence," Economic Modelling, Elsevier, vol. 30(C), pages 754-769.
  14. Jean-Yves Filbien & Fabien Labondance, 2012. "Reactions Des Marches D’Actions De La Zone Euro Aux Annonces Non Anticipees De La Bce," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(2), pages 179-204.
  15. Papadamou, Stephanos & Sidiropoulos, Moïse & Spyromitros, Eleftherios, 2017. "Interest rate dynamic effect on stock returns and central bank transparency: Evidence from emerging markets," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 951-962.
  16. Kontonikas, Alexandros & MacDonald, Ronald & Saggu, Aman, 2013. "Stock market reaction to fed funds rate surprises: State dependence and the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4025-4037.
  17. Jan Hanousek & Evžen Kočenda, 2010. "Vliv vnitrodenních makroekonomických zpráv na akciové trhy nových států EU
    [Effect of Intraday Information Flow on the Emerging European Stock Markets]    ," Politická ekonomie, University of Economics, Prague, vol. 2010(4), pages 435-457.

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