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On Monetary Policy and Stock Market Anomalies


  • Alexandros Kontonikas,

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  • Alexandros Kostakis

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    • The first author is at the Adam Smith Business School, University of Glasgow, Glasgow, UK. The second author is at the Manchester Business School, University of Manchester, UK. The authors wish to thank the Editor and an anonymous referee for useful comments and suggestions. They also wish to thank participants in seminars at Cardiff University, University of Liverpool, University of East Anglia, and at the 2010 European Finance Association and Financial Management Association (European) conferences. (Paper received May, 2011, revised version accepted October, 2012).


This study utilizes a macro-based VAR framework to investigate whether stock portfolios formed on the basis of their value, size and past performance characteristics are affected in a different manner by unexpected US monetary policy actions during the period 1967–2007. Full sample results show that value, small capitalization and past loser stocks are more exposed to monetary policy shocks compared with growth, big capitalization and past winner stocks. Sub-sample analysis, motivated by variation in the realized premia and parameter instability, reveals that the impact of monetary policy shocks on these portfolios is significant and pronounced only during the pre-1983 period.

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