Monetary Policy Announcements and Stock Returns: Evidence from the Pakistani Market

Rahman, Habib Ur; Mohsin, Hasan

doi:10.1007/s11300-011-0208-0

Cited by 6 publications

(3 citation statements)

References 36 publications

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“…It is evident from the study that stock prices react negatively to changes in interest and vice versa for expansionary monetary policy (Baker & Meyer, 1980;Burki, 2016;Chen et al, 1999;Huang et al, 2016;Thorbecke, 1997). Accordingly, Rahman and Mohsin (2011) and Balke and Wohar (2006) have arrived at the conclusion that discount rate has a strong negative effect on equity and stock returns of various industries of the Pakistani sector.…”

Section: Literature Reviewmentioning

confidence: 99%

Nexus Between Discount Rate and Industrial Performance

Khan

2021

Global Business Review

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This study investigates the short-run responses and long-run performances of seven industries’ stock indices with discount rate changes in the firms listed in the Pakistan Stock Exchange (PSE) between 2009 and 2018. The results indicate that short-run returns react positively to discount rate reduction, excluding the oil industry and vice versa. Therefore, long-term performance responds favourably with a reduction in the discount rate. Discount rate changes affect the apparel industry the most, while the oil industry is the least on the list. This study serves potential investors for their returns against investment among these industries. Furthermore, it works as a guideline for regulators and policymakers to manage fluctuations for a stable capital market.

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Section: Literature Reviewmentioning

confidence: 99%

Nexus Between Discount Rate and Industrial Performance

Khan

2021

Global Business Review

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“…Monetary policy, whether expansionary or contractionary, is meant to facilitate maximum employment, stabilize prices (such as equity prices) as well as moderate long-term interest rates. Stock market stability is crucial in assessing the economic environment of a country but very sensitive to monetary policies, although the level and nature of sensitivity differs in each country (Rahman and Mohsin, 2011). Tsai (2011) notes the importance of monetary policy in dictating equity returns as it adjusts the discount rate when the present value model of asset pricing is used.…”

Section: Journal Of Financialmentioning

confidence: 99%

Literature Review and Classification: Monetary Policy and Equity Market Volatility

Bwire¹,

Zéman²,

kecskés³

2018

JFSR

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This article presents an analysis of the literature on monetary policy and equity volatility. The study analyzed and classified 67 articles that were published from between 2010 to end of 2017 in the databases Web of Science, Science Direct and Springer. The articles were identified using the keywords: 'monetary policy' and 'equity market volatility'. The prominence of reviewed literature is premised on: publication year, geographical/country location, methodology/data, unit of analysis, and statistical technique. Surprise or policy uncertainty was the most researched aspect whereas transparency of relevant monetary institutions and emerging economies received the least attention. Through analysis and classification of the reviewed articles, it was possible to identify the existing gaps in the current literature on monetary policy and equity market volatility; thus, contributing to a future research agenda on the topic. Furthermore, the study could add value to researchers or those working in monetary regulatory institutions and or capital markets; by providing a structured and quantitative overview of existing literature.

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“…They reported an inverse relationship by using event study methodology. Rahman and Mohsin (2011a) used event study methodology to analyze the impact of monetary policy on stock returns in Pakistan and observed the significant impact of monetary policy announcements on stock returns. They decomposed interest rates into expected and un-expected interest rates by using Hodrick Prescott filter, because future contracts bases on short term money market interest rates were not available in KSE from the period of their study.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Policy Rate Changes on Bank Stock Returns in Pakistan

Habiburrahman¹,

Mohsin²,

Rivers

2014

JFE

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Objective of this study is to analyze the impact of policy rate changes on bank stock returns in Pakistan by using daily stock returns from 1998 to 2011. We used event study approach by constructing the estimation window of 250 days and an event window of 31 days (15 pre-event days, event day and 15 post event days. The daily stock returns from 1998 to 2011 have been used to analyze the impact of policy rate changes by State Bank of Pakistan (SBP) on banking stock returns. The study used ARIMA model to estimate the normal returns by using estimation window of 250 days.1 Since Monetary Policy committee decides changes in policy rate, we have used date of MP Committee meeting as an event. Reportedly, 35 meetings were conducted during study period from Jan 1998 to Dec 2011. Abnormal returns are calculated by taking the difference of actual daily stock returns and estimated daily stock returns. Abnormal daily stock returns are aggregated as cumulative abnormal returns (CAR). The CAR at 0.6340 showed a significant impact of policy rate changes on banks stock returns. The study finds 31 out of all 35 events have significant impact on banks stock returns and returns were normal at 4th day of MP announcement. Further, we analyzed the impact with respect to expansionary and contractionary monetary policy and observed that the highest positive impact on banks stock returns was due to expansionary monetary policy. JEL Classifications: E44, E52, E58, G21

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Monetary Policy Announcements and Stock Returns: Evidence from the Pakistani Market

Abstract: Monetary policy, Stock returns, Anticipated and un-anticipated interest rates, GOOO,

Cited by 6 publications

References 36 publications

Nexus Between Discount Rate and Industrial Performance

Nexus Between Discount Rate and Industrial Performance

Literature Review and Classification: Monetary Policy and Equity Market Volatility

The Effect of Policy Rate Changes on Bank Stock Returns in Pakistan

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