Asset prices and expected monetary policy: evidence from daily data

This article explores the relationships among Libor, gold prices, the exchange rate, oil prices, fed funds futures prices and stock prices at a daily frequency. This article examines whether expected monetary policy, measured by changes in the prices of fed funds futures contracts, reacts to high fr...

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Bibliographic Details
Published in:Applied economics 2014-03, Vol.46 (9), p.985-995
Main Authors: Ivrendi, Mehmet, Pearce, Douglas K.
Format: Article
Language:English
Subjects:
Asset pricing
Capital market
Commodity prices
Crude oil prices
Exchange rates
Federal Reserve monetary policy
financial markets
Foreign exchange rates
LIBOR
macroeconomy
Monetary policy
Recession
Stock prices
Studies
SVAR
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Summary:This article explores the relationships among Libor, gold prices, the exchange rate, oil prices, fed funds futures prices and stock prices at a daily frequency. This article examines whether expected monetary policy, measured by changes in the prices of fed funds futures contracts, reacts to high frequency changes in asset prices and, in turn, whether asset prices respond to changes in expected monetary policy. The article reveals that there are statistically significant relationships between expected US monetary policy and shocks to Libor and exchange rates. It also reveals that there is no evidence of a systematic relationship between stock prices and expected monetary policy changes. Splitting the data into expansionary and recessionary periods using NBER dating, we find results for the expansionary periods that are very similar to the results for the entire period. For the periods of recession, we find little evidence of significant linkages between markets.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2013.864038