Assessing the Impact of the ECB's Monetary Policy on the Stock Markets: A Sectoral View
This paper analyzes the response of the European stock markets to the monetary policy shocks by the European Central Bank using the heteroskedasticity based approach of Rigobon (2003). We find that monetary policy tightening has a heterogeneous impact on the Euro Area sectors on the day the monetary policy is publicly announced. Furthermore, we provide statistical evidence against the use of the popular event study approach when assessing the impact of monetary policy shocks on the stock market as the maintained assumptions can be rejected for the aggregate stock market and for most of the sectoral stock market indexes.
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- Rigobon, Roberto & Sack, Brian, 2004.
"The impact of monetary policy on asset prices,"
Journal of Monetary Economics,
Elsevier, vol. 51(8), pages 1553-1575, November.
- Roberto Rigobon & Brian P. Sack, 2002. "The Impact of Monetary Policy on Asset Prices," NBER Working Papers 8794, National Bureau of Economic Research, Inc.
- Roberto Rigobon & Brian P. Sack, 2002. "The impact of monetary policy on asset prices," Finance and Economics Discussion Series 2002-4, Board of Governors of the Federal Reserve System (U.S.).
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- Ehrmann, Michael & Fratzscher, Marcel, 2004. "Taking stock: monetary policy transmission to equity markets," Working Paper Series 354, European Central Bank.
- Bomfim, Antulio N., 2003. "Pre-announcement effects, news effects, and volatility: Monetary policy and the stock market," Journal of Banking & Finance, Elsevier, vol. 27(1), pages 133-151, January.
- Patelis, Alex D, 1997. " Stock Return Predictability and the Role of Monetary Policy," Journal of Finance, American Finance Association, vol. 52(5), pages 1951-1972, December. Full references (including those not matched with items on IDEAS)