Journal of Financial Economics Vol. 153 2024
Fearing the Fed: How wall street reads main street
Abstract
We provide strong evidence of a countercyclical sensitivity of the stock market to major macroeconomic announcements. The most notable cyclical variation takes place within expansions: sensitivity is largest early in an expansion and essentially zero late in an expansion. By exploiting the comovement pattern between stocks and bonds around announcements, we show that the stock market sensitivity is large when the cash flow component of news is least offset by news about future risk-free rates. Observed fluctuations in stock sensitivities can be attributed to shifting perceptions of monetary policy responsiveness.
- DOI
- 10.1016/j.jfineco.2024.103790
- Volume
- 153
- Pages
- 103790
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref