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Finance and Economics Discussion Series: What Explains the Stock Market's Reaction to Federal Reserve Policy

by Ben S. Bernanke , Kenneth N. Kuttner , United States Federal Reserve Board
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Current price ₹1,565.00
Original price ₹1,770.00
Original price ₹1,770.00
Original price ₹1,770.00
(-12%)
₹1,565.00
Current price ₹1,565.00

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Book cover type: Paperback
  • ISBN13: 9781288713219
  • Binding: Paperback
  • Subject: N/A
  • Publisher: Bibliogov
  • Publisher Imprint: Bibliogov
  • Publication Date:
  • Pages: 60
  • Original Price: GBP 13.99
  • Language: English
  • Edition: N/A
  • Item Weight: 127 grams
  • BISAC Subject(s): General

This paper analyzes the impact of changes in monetary policy on equity prices, with the objectives both of measuring the average reaction of the stock market and also of understanding the economic sources of that reaction. We find that, on average, a hypothetical unanticipated 25-basis-point cut in the federal funds rate target is associated with about a one percent increase in broad stock indexes. Adapting a methodology due to Campbell (1991) and Campbell and Ammer (1993), we find that the effects of unanticipated monetary policy actions on expected excess returns account for the largest part of the response of stock prices.

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