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Monetary policy uncertainty and stock market returns: influence of limits to arbitrage and the economic cycle

dc.contributor.authorPaule-Vianez, Jessica
dc.contributor.authorPrado-Román, Camilo
dc.contributor.authorGómez-Martínez, Raúl
dc.date.accessioned2024-07-30T11:18:17Z
dc.date.available2024-07-30T11:18:17Z
dc.date.issued2020
dc.identifier.citationPaule-Vianez, J., Prado-Román, C., & Gómez-Martínez, R. (2020). Monetary policy uncertainty and stock market returns: influence of limits to arbitrage and the economic cycle. Studies in Economics and Finance, 37(4), 777-798.es
dc.identifier.issn1086-7376
dc.identifier.urihttps://hdl.handle.net/10115/39088
dc.description.abstractPurpose – This paper aims to examine the impact that monetary policy uncertainty (MPU) has on stock market returns by taking into account limits to arbitrage and the economic cycle. Design/methodology/approach – Using four news-based MPU measures, regression models have been applied in this study over a sample period from January 1985 to March 2020. The limits to arbitrage have been considered by taking Russell 1000 Value, Russell 1000 Growth, Russell 2000 Value and Russell 2000 Growth indices, and business cycles were established following the National Bureau of Economic Research. Findings – A negative MPU impact on stock returns has been found. In particular, the most subjective and difficult to arbitrate stocks have been more sensitive to MPU. However, it could not be concluded that MPU has a greater or lesser impact on stock returns depending on the economic cycle. Practical implications – The findings obtained are particularly useful for monetary policymakers showing the importance and need for greater control over the transparency of their decisions to maintain the stability of financial markets. The findings obtained are also useful for investors when selecting their investment assets at times of the highest MPU. Originality/value – To the best of the authors’ knowledge, this is one of the few studies investigating the effect of MPU on stock market returns, and the first to analyse this relationship taking into account the economic cycle and limits to arbitrage.es
dc.language.isoenges
dc.publisherEmerald Publishing Limitedes
dc.rightsAttribution-NonCommercial 4.0 International
dc.rights.urihttps://creativecommons.org/licenses/by-nc/4.0/
dc.subjectBehavioural financees
dc.subjectEconomic cyclees
dc.subjectLimited arbitragees
dc.subjectMonetary policy uncertaintyes
dc.subjectStock market returnses
dc.titleMonetary policy uncertainty and stock market returns: influence of limits to arbitrage and the economic cyclees
dc.typeinfo:eu-repo/semantics/articlees
dc.identifier.doi10.1108/SEF-04-2020-0102es
dc.rights.accessRightsinfo:eu-repo/semantics/openAccesses


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Attribution-NonCommercial 4.0 InternationalExcept where otherwise noted, this item's license is described as Attribution-NonCommercial 4.0 International