UK stock returns and the impact of domestic monetary policy shocks

Don Bredin; Stuart Hyde; Dirk Nitzsche; Gerard O'Reilly

doi:10.1111/j.1468-5957.2006.02001.x

UK stock returns and the impact of domestic monetary policy shocks

Don Bredin, Stuart Hyde, Dirk Nitzsche, Gerard O'Reilly

A&F Accounting & Finance

Research output: Contribution to journal › Article › peer-review

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. © 2007 Blackwell Publishing Ltd.

Original language	English
Pages (from-to)	872-888
Number of pages	16
Journal	Journal of Business Finance and Accounting
Volume	34
Issue number	5-6
DOIs	https://doi.org/10.1111/j.1468-5957.2006.02001.x
Publication status	Published - Jun 2007

Keywords

Interest rates
Monetary policy
Stock market

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1111/j.1468-5957.2006.02001.x

Cite this

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title = "UK stock returns and the impact of domestic monetary policy shocks",

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. {\textcopyright} 2007 Blackwell Publishing Ltd.",

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AU - Bredin, Don

AU - Hyde, Stuart

AU - Nitzsche, Dirk

AU - O'Reilly, Gerard

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N2 - 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. © 2007 Blackwell Publishing Ltd.

AB - 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. © 2007 Blackwell Publishing Ltd.

KW - Interest rates

KW - Monetary policy

KW - Stock market

U2 - 10.1111/j.1468-5957.2006.02001.x

DO - 10.1111/j.1468-5957.2006.02001.x

M3 - Article

SN - 1468-5957

VL - 34

SP - 872

EP - 888

JO - Journal of Business Finance and Accounting

JF - Journal of Business Finance and Accounting

IS - 5-6

ER -

UK stock returns and the impact of domestic monetary policy shocks

Abstract

Keywords

UN SDGs

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