The impact of monetary policy on volatility of equity returns: a VARX and HFI approach

• Autor(es): Duque, João Mário Ferreira
• Data: 2018
• Identificador Persistente: http://hdl.handle.net/10362/36365
• Origem: Repositório Institucional da UNL
• Assunto(s): Monetary policy; Market volatility; High frequency identification; VARX; Domínio/Área Científica::Ciências Sociais::Economia e Gestão
• Tipo de Documento: Dissertação de mestrado
• Idioma: Inglês
• Orientador(es): Duarte, João
• Contribuidor(es): RUN

Descrição

This study provides evidence for a positive relationship between an unexpected monetary policy shock and volatility of equity returns. It also finds a link between the former and possible transmission mechanisms: Dividend Yield, Discount Rate, and Leverage. It combines the dynamic analysis allowed by the VARX framework suggested by Gospodinov and Jamali (2015), while obtaining the monetary shocks from the instrumental VAR with HFI estimated by Gertler and Karadi (2015), that grant exogeneity and accounts for shocks to Forward Guidance. It also shows how results may change drastically when using a traditional shock measurement, especially when considering the observations after the last financial crisis.