Monetary Policy and the Stock Market: Time-Series Evidence

Andreas Neuhierl and Michael Weber

No 22831, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The slope factor is constructed from changes in federal funds futures of different horizons and predicts stock returns at the weekly frequency: faster policy easing positively predicts returns. It contains information about the speed of future monetary policy tightening and loosening, and predicts changes in interest rates and forecast revisions of professional forecasters. The tone of speeches by FOMC members correlates with the slope factor. The predictive power concentrates in times of high uncertainty in line with the pre-FOMC announcement drift. Our findings show the path of interest rates matters for asset prices, and monetary policy affects asset prices continuously.

JEL-codes: E31 E43 E44 E52 E58 G12 (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: AP EFG ME
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Monetary Policy and the Stock Market: Time Series Evidence (2017)
Working Paper: Monetary Policy and the Stock Market: Time-Series Evidence (2016)
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