The paper investigates the effect of monetary policy uncertainty on stock return volatility. Contrary to the widely … accepted wisdom that higher uncertainty leads to higher volatility, we find that monetary policy uncertainty negatively … predicts stock return volatility both in and out of sample at the monthly frequency. The forecasting performance is robust even …

The paper investigates the effect of monetary policy uncertainty on stock market volatility. Higher monetary … uncertainty leads to lower stock market volatility both in sample and out of sample. Monetary policy uncertainty matters more for … the volatility of big firms, profitable firms and past winner firms. The channel of future cash flow volatility helps …