UK Stock returns & the impact of domestic monetary policy shocks

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Title: UK Stock returns & the impact of domestic monetary policy shocks
Authors: Bredin, Donal
Hyde, Stuart
O'Reilly, Gerard
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Date: 21-Oct-2005
Abstract: We investigate the influence of changes in UK monetary policy on UK stock returns and the possible reasons behind such a response. Firstly, we conduct an event study to assess the impact of unexpected changes in monetary policy on aggregate and sectoral stock returns. The decomposition of unexpected changes in the policy rate is based on futures markets data. Secondly, using a variance decomposition in the spirit of Campbell (1991) we attempt to identity the channels behind the response of stock returns to monetary policy surprises. The variance decomposition results indicate that the monetary policy shock leads to a persistent negative response in terms of future excess returns for a number of sectors.
Type of material: Working Paper
Publisher: University College Dublin. School of Business. Centre for Financial Markets
Copyright (published version): 2005, Centre for Financial Markets
Keywords: Monetary policyStock marketInterest rates
Subject LCSH: Monetary policy--Great Britain
Stock exchanges--Great Britain
Interest rates--Great Britain
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Centre for Financial Markets Working Papers

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