Impact of monetary policy announcements on bank index in India

Sushma Priyadarsini Yalla, Karuna Jain and Som Sekhar Bhattacharyya

Afro-Asian Journal of Finance and Accounting, 2020, vol. 10, issue 1, 112-130

Abstract: Understanding the impact of monetary policy announcements on systemic risk and abnormal returns (ARs) of banking sector indexes is important to assess the changes in the cost of equity capital and arrive at a fair rate of return of bank stocks. Empirical studies of this nature from the Indian context are scarce. The present study analyses the impact of monetary policy announcements on systemic risk and abnormal returns of bank index in India. Capital asset pricing model (CAPM) along with Kalman filter was used to estimate the daily systemic risk (beta) and abnormal returns. Ordinary least squares (OLS) regression and event study methodology were used to assess the impact of monetary policy announcements on systemic risk and abnormal returns.

Keywords: India; monetary policy announcements; bank index; systemic risk; abnormal return; Kalman filter; event study methodology. (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ids:afasfa:v:10:y:2020:i:1:p:112-130

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