What Explains the Stock Market's Reaction to Federal Reserve Policy?
Ben Bernanke and
Kenneth Kuttner ()
Journal of Finance, 2005, vol. 60, issue 3, 1221-1257
This paper analyzes the impact of changes in monetary policy on equity prices, with the objectives of both measuring the average reaction of the stock market and understanding the economic sources of that reaction. We find that, on average, a hypothetical unanticipated 25‐basis‐point cut in the Federal funds rate target is associated with about a 1% increase in broad stock indexes. Adapting a methodology due to Campbell and Ammer, we find that the effects of unanticipated monetary policy actions on expected excess returns account for the largest part of the response of stock prices.
References: Add references at CitEc
Citations: View citations in EconPapers (614) Track citations by RSS feed
Downloads: (external link)
Working Paper: What explains the stock market's reaction to Federal Reserve policy? (2004)
Working Paper: What Explains the Stock Market's Reaction to Federal Reserve Policy? (2004)
Journal Article: What explains the stock market's reaction to Federal Reserve policy? (2003)
Working Paper: What explains the stock market's reaction to Federal Reserve policy? (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:60:y:2005:i:3:p:1221-1257
Ordering information: This journal article can be ordered from
Access Statistics for this article
More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().