| Author: | Jensen, G. R. Johnson, R. R. Bauman, W. S. |
| Title: | Federal Reserve monetary policy and industry stock returns |
| Journal: | Journal of Business Finance and Accounting
1997 : JUN, VOL. 24:5, p. 629-644 |
| Index terms: | MONETARY POLICY STOCK RETURNS INDUSTRIES |
| Language: | eng |
| Abstract: | This paper analyses the long-time performance and and short-term reaction of 16 industry stock indices in relation to changes in the Federal Reserve discount rate. The short-term results indicate that all industries except the oil industry react positively to rate decreases and negatively to rate increases. Also the long-term results display significant return patterns associated with discount rate changes. The long-term results provide that industries with a significant import or export component will be influenced by changes in monetary policy. The short-term results support the nominal contract hypothesis as the finance industry reacts strongly to discount rate changes. The results show that stock performance varied with changes in the monetary environment. Monetary considerations and the sensitivity of firms are relevant for asset pricing. |
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