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Is the stock market impervious to monetary policy announcements: Evidence from emerging India

Edwin prabu A (), Indranil Bhattacharyya and Partha Ray

International Review of Economics & Finance, 2016, vol. 46, issue C, 166-179

Abstract: This study uses “event study” and “identification through heteroscedasticity” methodology to study the impact of Indian monetary policy announcements on stock indices during 2004–14. Although stock indices decline after announcement of policy tightening, the results are statistically insignificant. Unanticipated policy announcements have weakly significant impact, particularly on banking stocks. Dominance of the banking channel and ineffectiveness of the asset price channel in monetary transmission could have contributed to this non-confirmative result. Finally, UMP announcements of the US Fed also do not impact Indian stock returns except for a few events of LSAP in 2008 and Operation Twist in 2011.

Keywords: India; Stock market; Monetary policy announcements; Event Study; Identification through Heteroscedasticity (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 G14 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:46:y:2016:i:c:p:166-179

DOI: 10.1016/j.iref.2016.09.007

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