Monetary Policy and Volatility of Value and Growth Stocks (2009-2021)

Pedro Vartanian, Raphael Abs Musa de Lemos and Alvaro Alves de Moura Júnior

International Journal of Business and Management, 2024, vol. 19, issue 1, 46

Abstract: Especially after the subprime international financial crisis, which began in 2007/2008, the role of central banks and the implementation of monetary policy gained ground and affected financial markets. In such a scenario, quantitative easing, a monetary stimulus program implemented by several central banks, significantly reduced interest rates, especially in developed countries. In this context, the objective of the research is to investigate whether there is a relationship between the monetary policy actions of the Federal Reserve (Fed) and the volatility of value and growth stocks in the USA in the period between 2009 and 2021 using a generalized heteroscedastic conditional autoregressive (Garch) model. The research hypothesizes that both value and growth stocks react with increased volatility to changes in monetary policy, with growth stocks showing superior sensitivity. Among the results found, there is evidence that the policies implemented by the Fed over the period led to volatility in the markets, with an emphasis on the intensity of volatility for value stocks to the detriment of growth stocks, which refuted, albeit partially, the initially formulated hypothesis.

Date: 2024
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