Eurozone Stock Market Reactions to Unexpected ECB Monetary Policy Announcements

Brussels Economic Review, Vol. 55, No. 2

Posted: 16 May 2011 Last revised: 10 Feb 2013

See all articles by Jean-Yves Filbien

Jean-Yves Filbien

University of Lille I

Labondance Fabien

Louvain School of Management (UCL); University of Grenoble

Date Written: May 6, 2011

Abstract

To examine the Eurozone stock market reactions to European Central Bank (ECB) monetary policy announcement surprises, we study the effect of unexpected changes in the ECB's main refinancing rate on aggregate and sectorial Eurozone equity returns. We also analyse the results according to varying business conditions. We estimate unexpected changes on the basis of the market's expectations released in the financial press just before the monetary policy announcement. Using an event study methodology for the 1999-2008 period, we found that the impact of ECB monetary policy surprise is not significant for Euro-zone stock markets. However, we find a significant stock market reaction around unexpected ECB monetary policy announcements when we account for business conditions.

Keywords: Monetary Policy, Stock Prices, Event Study, ECB

JEL Classification: E52, E58, G14

Suggested Citation

Filbien, Jean-Yves and Fabien, Labondance, Eurozone Stock Market Reactions to Unexpected ECB Monetary Policy Announcements (May 6, 2011). Brussels Economic Review, Vol. 55, No. 2, Available at SSRN: https://ssrn.com/abstract=1833622 or http://dx.doi.org/10.2139/ssrn.1833622

Jean-Yves Filbien (Contact Author)

University of Lille I ( email )

104, avenue du peuple Belge
Villeneuve d'Ascq Cedex, 59655
France

Labondance Fabien

Louvain School of Management (UCL) ( email )

Belgium

University of Grenoble ( email )

Grenoble
France

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