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Risk, Monetary Policy and Asset Prices in a Global World

Author

Listed:
  • Bekaert, Geert
  • Hoerova, Marie
  • Xu, Nancy

Abstract

We study how monetary policy and risk shocks affect asset prices in the US, the euro area, and Japan since the turn of the century. We differentiate between “traditional†monetary policy and communication events, each decomposed into “pure†and information shocks. Communication shocks from the US spill over to risk in the euro area and vice versa. Both monetary policy and communication shocks spill over to stocks, with euro area information spillovers being particularly strong. US spillovers are consistent with global CAPM intuition whereas euro area spillovers are larger. Importantly, we document a strong global component of risk shocks which is not driven by monetary policy.

Suggested Citation

  • Bekaert, Geert & Hoerova, Marie & Xu, Nancy, 2023. "Risk, Monetary Policy and Asset Prices in a Global World," CEPR Discussion Papers 18229, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18229
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    Cited by:

    1. is not listed on IDEAS
    2. Rompolis, Leonidas S., 2025. "Quantitative easing, uncertainty, and risk aversion," Journal of Banking & Finance, Elsevier, vol. 177(C).
    3. Jia, Yuecheng & Liu, Yuzheng & Wu, Yangru & Yan, Shu, 2024. "Information spillover and cross-predictability of currency returns: An analysis via Machine Learning," Journal of Banking & Finance, Elsevier, vol. 169(C).
    4. Linton, Oliver B. & Tang, Haihan & Wu, Jianbin, 2025. "A large confirmatory dynamic factor model for stock market returns in different time zones," Journal of Econometrics, Elsevier, vol. 249(PB).
    5. Chuliá, Helena & Garrón, Ignacio & Uribe, Jorge M., 2024. "Vulnerable funding in the global economy," Journal of Banking & Finance, Elsevier, vol. 169(C).
    6. Ann Xing, Bingxin & Feunou, Bruno & Nongni-Donfack, Morvan & Sekkel, Rodrigo, 2024. "U.S. macroeconomic news and low-frequency changes in bond yields in Canada, Sweden and the U.K," Journal of Banking & Finance, Elsevier, vol. 168(C).
    7. Battistini, Niccolò & Falagiarda, Matteo & Hackmann, Angelina & Roma, Moreno, 2025. "Navigating the housing channel of monetary policy across euro area regions," European Economic Review, Elsevier, vol. 171(C).
    8. Licheng Zhang, 2025. "Monetary policy and equity returns: The role of investor risk aversion," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 2867-2882, July.
    9. Ha, Jongrim & Kose, M. Ayhan & Otrok, Christopher & Prasad, Eswar S., 2025. "Global macro-financial cycles and spillovers," Journal of Banking & Finance, Elsevier, vol. 178(C).
    10. Filippou, Ilias & Gozluklu, Arie & Rozental, Hari, 2024. "ETF arbitrage and international diversification," Journal of Banking & Finance, Elsevier, vol. 168(C).

    More about this item

    JEL classification:

    • 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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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