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MONEY SUPPLY ANNOUNCEMENTS AND INTEREST SENSITIVE STOCKS
Author(s) -
Prag Jay
Publication year - 1994
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1002/j.1873-5924.1994.tb00577.x
Subject(s) - monetary economics , interest rate , stock (firearms) , economics , proxy (statistics) , money supply , moneyness , financial economics , mechanical engineering , machine learning , computer science , engineering
Much of the money announcement literature provides evidence that there is a significant response of nominal interest rates to unexpected changes in the money stock, especially in the October 1979‐October 1982 period. These money announcements provide a proxy for unexpected interest rate changes which can be used in a novel test for the interest sensitivity of stocks. Using the response of disaggregated stock price data to money announcements, we reach two major conclusions. First, that the interest rate response observed in the money announcement literature was predominantly a change in real rates. Second, an unusual group of stocks are excessively sensitive to these real rate changes and many groups of stocks that might logically have been expected to be sensitive are not.