This study examines the relationship between bond fund flows, stock market returns and financial policies in developed and developing economies. The findings suggest a bidirectional (negative) relationship between bond flows and market returns in the presence of fiscal and monetary policy for...

This paper aims to identify the effect of monetary policy shocks on stock prices through the lens of Mundell and Fleming's “Impossible Trinity” theory. Our identification strategy seeks to solve the simultaneity and omitted variable problems inherent in studies that focus on the effect of...

We present evidence of significant bias in event studies that investigate the effect of U.S. monetary policy on U.S. stock prices. To overcome this bias, we propose a new identification method based on the "Impossible Trinity" theory which argues that an economy with a fixed exchange rate and...

This paper attempts to identify how monetary policy shocks affect stock prices by using Mundell and Fleming's theory of the "Impossible Trinity". According to this theory, it is impossible to simultaneously have a fixed exchange rate, free capital movement (an absence of capital controls), and...

This paper investigates the structural relationships between monetary policy and stockreturns. We build an asset pricing model incorporating a standard monetary policy ruleinto a consumption-CAPM framework. Our model quantitatively explains the negativerisk premium of expansionary monetary...

This paper empirically investigates the following three questions: (i) Do stock returns respond to monetary policy shocks? (ii) Do stock returns alter the transmission mechanism of monetary policy? and (iii) Does monetary policy systematically react to stock returns? Existing research based on...

We investigate the impact of monetary policy shocks on excess corporate bonds returns. We obtain a significant negative response of bond returns to policy shocks, which is especially strong among low-grading bonds. The largest portion of this response is related to higher expected bond returns...

The purpose of this study is to examine the effects of monetary policy on equity returns by applying an alternative econometric approach. Campbell and Ammer (1993) decomposed unexpected equity excess returns into three news components: risk premium news, real interest rate news and cash-flow...

We study how monetary policy and risk shocks affect asset prices in the US, the euro area, and Japan, differentiating between "traditional" monetary policy and communication events, each decomposed into "pure" and information shocks. Communication shocks from the US spill over to risk in the...

We find that the FOMC-announcement-day return premium earned by a firm is positively related to the increase in its ex ante, option-implied skewness prior to the announcement. This finding is consistent with: (1) the existence of an announcement-day Fed put that is partially anticipated by the...