This article has benefited from the comments of Darren Grant, Mark Wohar, an anonymous referee, and William T. Moore (the former editor). Any remaining errors are the sole responsibility of the author.
THE INTERACTION OF MONETARY POLICY AND STOCK RETURNS
Article first published online: 1 NOV 2006
Journal of Financial Research
Volume 29, Issue 4, pages 523–535, Winter 2006
How to Cite
Crowder, W. J. (2006), THE INTERACTION OF MONETARY POLICY AND STOCK RETURNS. Journal of Financial Research, 29: 523–535. doi: 10.1111/j.1475-6803.2006.00192.x
- Issue published online: 1 NOV 2006
- Article first published online: 1 NOV 2006
The “irrational exuberance” of the stock market in the late 1990s led to a discussion of the appropriate policy response by monetary authorities. Any response would be contingent on the stock market reaction to policy shocks. In this study, I employ a structural vector autoregression to estimate the response of the stock market returns to innovations in the federal funds rate. The role of the stock market in the Federal Reserve policy rule can also be examined empirically.