This paper analyzes the impact of unanticipated changes in the federal funds rate target on equity prices, with the aim of both estimating the size of the typical reaction and understanding the reasons for the market's response. We find that over the June 1989-December 2002 sample period, a...

The authors model stock returns as a stochastic function of a constant expected return and the financing costs resulting from delayed delivery, to examine three potential sources of instability in stock-return model parameter estimates.

The U.S, stock market entered 2000 with five consecutive years of exceptional gains. The S&P 500 index gained more than 18 percent each of these five years, and its value tripled since 1995. Concern has arisen recently that the stock market may be headed for a downturn because firms' share...