Version 1
: Received: 26 July 2023 / Approved: 26 July 2023 / Online: 27 July 2023 (08:43:34 CEST)
How to cite:
Thorbecke, W. The Impact of Monetary Policy on the U.S. Stock Market since the COVID-19 Pandemic. Preprints2023, 2023071843. https://doi.org/10.20944/preprints202307.1843.v1
Thorbecke, W. The Impact of Monetary Policy on the U.S. Stock Market since the COVID-19 Pandemic. Preprints 2023, 2023071843. https://doi.org/10.20944/preprints202307.1843.v1
Thorbecke, W. The Impact of Monetary Policy on the U.S. Stock Market since the COVID-19 Pandemic. Preprints2023, 2023071843. https://doi.org/10.20944/preprints202307.1843.v1
APA Style
Thorbecke, W. (2023). The Impact of Monetary Policy on the U.S. Stock Market since the COVID-19 Pandemic. Preprints. https://doi.org/10.20944/preprints202307.1843.v1
Chicago/Turabian Style
Thorbecke, W. 2023 "The Impact of Monetary Policy on the U.S. Stock Market since the COVID-19 Pandemic" Preprints. https://doi.org/10.20944/preprints202307.1843.v1
Abstract
Inflation in 2021 and 2022 grew much faster than the Federal Reserve expected. The Fed downplayed inflation in 2021 and then increased the federal funds rate by 500 basis points between March 2022 and May 2023. This paper investigates how this unprecedented tightening impacted the stock market. To do so it estimates a fully specified multi-factor model that measures the exposure of 53 assets to Bauer and Swanson (2022) monetary policy surprises over the 1988 to 2019 period. It then uses the monetary policy betas to gauge investors’ beliefs about monetary policy between 2020 and 2023. The results indicate that changing perceptions about monetary policy multiplied uncertainty and stock market volatility.
Keywords
Monetary policy; inflation; stock returns
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
