It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which persistent data often result in unit roots that imply...

This paper studies the transmission of monetary policy to the stock market through investors' discount factors. To isolate this channel, we investigate the effect of US monetary policy surprises on the ratio of prices of the same stock listed simultaneously in Hong Kong and Mainland China, and...

In this paper, we investigate the dynamic response of stock market volatility to changes in monetary policy. Using a vector autoregressive model, our findings reveal a significant and asymmetric response of stock returns and volatility to monetary policy shocks. Although the increase in the...

We construct a slope factor from changes in federal funds futures of different horizons. Slope predicts stock returns at the weekly frequency: faster monetary policy easing positively predicts excess returns. Investors can achieve increases in weekly Sharpe ratios of 20% conditioning on the...

We investigate the impact of monetary policy announcements on stock market volatility in the U.S., Canada, Japan, the U.K., Germany, France and Italy during the 2006-2016 period. More specifically, we study the impact of policy rate and quantitative easing announcements of domestic and foreign...

The nature of the relation between stock returns and the three monetary variables of interest rates (bond yields), inflation and money supply growth, while oft studied, is one that remains unclear. We argue that the nature of the relation changes over time, and this variation is largely driven...

Asset pricing models assume the risk-free rate to be a key factor for equity prices. Hence, there should be a strong link between monetary policy rate uncertainty and equity return volatility, both in theory and data. This paper uses regression-based projections for realized variance to examine...

This study investigates stock price movements in response to macroeconomic shocks, allowing for asymmetry in this relationship. Given Ferson's (1989) finding that large and small stocks can exhibit different risk behaviors, we examine the behaviors of the KOSPI and KOSDAQ stock markets in...