DOI
10.2469/faj.v61.n1.2685
Abstract
Using 38 years of data, we show that U.S. monetary policy has had, and continues to have, a strong relationship with security returns. Specifically, we find that U.S. stock returns are consistently higher and less volatile during periods when the Federal Reserve is following an expansive monetary policy. Further, firms considered to be more sensitive to changes in monetary conditions, such as small firms and cyclicals, exhibit monetary-policy-related return patterns that are much more pronounced than average. Lastly, the influence of U.S. monetary policy is shown to be a global phenomenon, as international indices have return patterns similar to those for the U.S. market. Overall, our evidence suggests that investment professionals should continue to use monetary conditions when performing fundamental analysis of both U.S. and international securities.
Document Type
Article
Publication Date
1-2005
Publisher Statement
Copyright © 2005 CFA Institute. Article first published: Jan/Feb 2005. DOI: 10.2469/faj.v61.n1.2685.
The definitive version is available at: http://www.cfapubs.org/doi/pdf/10.2469/faj.v61.n1.2685
Full citation:
Conover, C. Mitchell, Gerald R. Jensen, Robert R. Johnson, and Jeffrey M. Mercer. "Is Fed Policy Still Relevant for Investors?" Financial Analysts Journal 61, no. 1 (January/February 2005): 70-79. doi:10.2469/faj.v61.n1.2685.
Recommended Citation
Conover, C. Mitchell; Jensen, Gerald R.; Johnson, Robert R.; and Mercer, Jeffrey M., "Is Fed Policy Still Relevant for Investors?" (2005). Finance Faculty Publications. 35.
https://scholarship.richmond.edu/finance-faculty-publications/35