Does Monetary Policy Have Asymmetric Effects on Stock Returns?
This paper investigates whether monetary policy has asymmetric effects on stock returns using Markov-switching models. Different measures of a monetary policy stance are adopted. Empirical evidence from monthly returns on the Standard & Poor's 500 price index suggests that monetary policy has larger effects on stock returns in bear markets. Furthermore, it is shown that a contractionary monetary policy leads to a higher probability of switching to the bear-market regime. Copyright 2007 The Ohio State University.
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Volume (Year): 39 (2007)
Issue (Month): 2-3 (03)
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