Monetary Policy and the Stock Market: Time-Series Evidence

Andreas Neuhierl, Michael Weber and Michael Weber
Authors registered in the RePEc Author Service: Michael Weber

No 6199, CESifo Working Paper Series from CESifo

Abstract: We construct a slope factor from changes in federal funds futures of different horizons. Slope predicts stock returns at the weekly frequency: faster monetary policy easing positively predicts excess returns. Investors can achieve increases in weekly Sharpe ratios of 20% conditioning on the slope factor. The tone of speeches by the FOMC chair correlates with the slope factor. Slope predicts changes in future interest rates and forecast revisions of professional forecasters. Our findings show that the path of future interest rates matters for asset prices, and monetary policy affects asset prices throughout the year and not only at FOMC meetings.

Keywords: return predictability; policy speeches; expected returns; macro news (search for similar items in EconPapers)
JEL-codes: E31 E43 E44 E52 E58 G12 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp6199.pdf (application/pdf)

Related works:
Working Paper: Monetary Policy and the Stock Market: Time Series Evidence (2017)
Working Paper: Monetary Policy and the Stock Market: Time-Series Evidence (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6199

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().