Does Monetary Policy Have Asymmetric Effects on Stock Returns?

Shiu-Sheng Chen

Macroeconomics from EconWPA

Abstract: This paper investigates whether monetary policy has asymmetric effects on stock returns using Markov-switching models. Different measures of the stance of monetary policy are adopted. Empirical evidence from monthly returns on the standard & Poor 500 (S&P 500) price index suggests that monetary policy has larger effects on stock returns in bear markets. Furthermore, it has been shown that contractionary monetary policy leads to a higher probability of switching to a recession in stock markets.

Keywords: Monetary Policy; Stock Returns; Markov-switching (search for similar items in EconPapers)
JEL-codes: E52 E32 G10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fin, nep-mac and nep-mon
Date: Written 2005-02-01
Note: Type of Document - pdf
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http://129.3.20.41/eps/mac/papers/0502/0502001.pdf (application/pdf)

Related works:
Journal Article: Does Monetary Policy Have Asymmetric Effects on Stock Returns? (2007)
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