Fearing the Fed: How wall street reads main street

Vadim Elenev, Tzuo-Hann Law, Dongho Song and Amir Yaron

Journal of Financial Economics, 2024, vol. 153, issue C

Abstract: We provide strong evidence of a countercyclical sensitivity of the stock market to major macroeconomic announcements. The most notable cyclical variation takes place within expansions: sensitivity is largest early in an expansion and essentially zero late in an expansion. By exploiting the comovement pattern between stocks and bonds around announcements, we show that the stock market sensitivity is large when the cash flow component of news is least offset by news about future risk-free rates. Observed fluctuations in stock sensitivities can be attributed to shifting perceptions of monetary policy responsiveness.

Keywords: Cyclical return variation; Macroeconomic news announcements; Monetary policy expectations (search for similar items in EconPapers)
JEL-codes: E30 E40 E50 G12 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Working Paper: Fearing the Fed: How Wall Street Reads Main Street (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:153:y:2024:i:c:s0304405x24000138

DOI: 10.1016/j.jfineco.2024.103790

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