Monetary policy shocks and the high-frequency network connectedness of stock markets

Dan Gabriel Anghel and Petre Caraiani

International Review of Economics & Finance, 2024, vol. 96, issue PA

Abstract: We study the high-frequency impact of monetary policy decisions on the structure of financial market networks, using 1-second return data for 10 industry-level equity indices in the United States. We find that FOMC meetings and policy surprises have a significant influence on network connectedness in returns, volatility, skewness, and kurtosis. The information related to policy decisions instantly shocks and is quickly dissipated throughout the financial network. Network connectedness shocks are positively impacted by the magnitude of interest rate surprises, with asymmetric effects by sign and nonlinear effects being weak. Our results have implications for monetary policy, systemic risk, and asset pricing.

Keywords: Monetary policy shocks; Financial markets; Financial networks; Event studies (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pa:s1059056024005501

DOI: 10.1016/j.iref.2024.103558

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