What explains the stock market's reaction to Federal Reserve policy?
By: Ben S. Bernanke, Kenneth N. Kuttner.
Contributors: Kuttner, Kenneth N.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10402; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10402.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Stocks -- Prices.; Monetary policy.
Description: "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"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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