Abstract

http://ssrn.com/abstract=1827842
 
 

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Why Does the Fed React to the Stock Market Changes?: A Covariance Decomposition
Analysis


Bedri Kamil Onur Tas


TOBB University of Economics and Technology - Department of Economics

October 1, 2009

TOBB University of Economics and Technology Department of Economics Working Paper No. 09-05

Abstract:     
This paper investigates the factors that affect the covariance between the federal funds rate and stock returns. I estimate a VAR system and implement covariance decomposition analysis. Most of the covariance between the federal funds rate and stock returns is affected by changes in stock market and output. These results conclude that the Fed is actually targeting stock returns directly.

Number of Pages in PDF File: 10

Keywords: Monetary Policy, Stock Returns, Covariance Decomposion

JEL Classification: E44, E52, E58; E61, C32

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Date posted: May 2, 2011  

Suggested Citation

Tas, Bedri Kamil Onur, Why Does the Fed React to the Stock Market Changes?: A Covariance Decomposition Analysis (October 1, 2009). TOBB University of Economics and Technology Department of Economics Working Paper No. 09-05. Available at SSRN: http://ssrn.com/abstract=1827842 or http://dx.doi.org/10.2139/ssrn.1827842

Contact Information

Bedri Kamil Onur Tas (Contact Author)
TOBB University of Economics and Technology - Department of Economics ( email )
Sogutozu Cad. No:43 Sogutozu
Ankara, 06560
Turkey
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