Individual Stock Returns and Monetary Policy: Evidence from Japanese Data


  • We would like to thank Ryuzo Miyao, Kazuo Ogawa, two anonymous referees and participants at the Japan Society of Monetary Economics held at Kagawa University for many useful comments, Yuzo Honda and Yoshihiro Kuroki for providing their data, and the Japan Society for the Promotion of Science (No. 21243027) and the Zengin Foundation for Studies on Economics and Finance (No. 0714) for financial support.


The present paper uses Japanese firm-level data to investigate the effects of monetary policy on stock. The main purpose of this paper is to examine whether monetary policy has heterogeneous effects on stock returns and whether such heterogeneity can be explained by existing theories of monetary transmission mechanisms. We find little evidence that the demand sides of the interest rate and balance sheet channels explain the heterogeneous effects of monetary policy. However, there is evidence that the supply sides of the interest rate and balance sheet channels, when measured by capital intensity, financial leverage and interest payment burden, can explain its heterogeneous effects.