fmonetary policy effects on vol

fmonetary policy effects on vol - MPRA Munich Personal...

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Unformatted text preview: MPRA Munich Personal RePEc Archive European Central Bank and Federal Reserve USA: monetary policy effects on the returns volatility of the Italian Stock Market Index Mibtel Francesco, Guidi Marche Polytechnic University, P.le Martelli, 8 60121 Ancona (Italy) September 2008 Online at http://mpra.ub.uni-muenchen.de/10759/ MPRA Paper No. 10759, posted 25. September 2008 / 18:03 1 European Central Bank and Federal Reserve USA: monetary policy effects on the returns volatility of the Italian Stock Market Index Mibtel † Francesco Guidi ‡ September 2008 Abstract What is the effect of either European Central Bank and Federal Reserve monetary policies on the Italian Index Mibtel? This paper aims to evaluate the impact of monetary policy announcements of the most important Central Banks on the volatility of returns which have been considered at both sectorial and sub-sectorial levels during the period 1999-2008. Using EGARCH models, this work shows that expansive monetary policies may influence stock market indexes much more than restrictive monetary policies. The difference among the two central bank monetary policies is that the ECB influences indexes much more than Fed monetary policy. JEL Classification: G10, E58 Key Words: Monetary Policies, Stock Returns, Volatility, EGARCH, European Central Bank, Federal Reserve USA. † I would like to thank Giulio Palomba and Alberto Zazzaro for their valuable comments and suggestions. All errors are mine. ‡ Corresponding author: Francesco Guidi, PhD candidate, Department of Economics, Marche Polytechnic University, P.le Martelli, 8 60121 Ancona (Italy), Email: [email protected] 2 1. Introduction In this work the impact of monetary policy announcements of both European Central Bank (ECB) and US Federal Reserve (Fed) on the volatility returns of the Italian stock index Mibtel has been analysed. This was previously disaggregated in sub-indexes in order to take into account the volatility of all economic sectors of the Italian economy. The way this work is linked to existing literature is twofold. On the one hand, it seems that any previous studies have tried to analyse the impact of the monetary policies of the two most important central banks through the disaggregation of the Italian stock market index in sectors and sub-sectors by using daily frequency data. On the other hand, previous studies analysed such dynamics by focusing on the most advanced stock markets like the US and the UK. A previous work which is quite close to the present studies is Kim and Nguyen (2008): these authors analysed the impact of monetary policy announcements of both the Reserve Bank of Australia (RBA) and the Fed on the Australian stock market....
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This note was uploaded on 01/29/2012 for the course ECONOMICS 101 taught by Professor Tikk during the Spring '11 term at University of Toronto.

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fmonetary policy effects on vol - MPRA Munich Personal...

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