Download This PaperMonetary Policy and Stock Market Valuation
International Journal of Central Banking, forthcoming
54 Pages Posted: 27 Oct 2021
There are 2 versions of this paper
Monetary Policy and Stock Market Valuation
Monetary Policy and Stock Market Valuation
Date Written: October 26, 2021
Abstract
This paper estimates the effect of monetary policy on the term structure of stock market risk premia. The implied stock market risk premia are obtained using analysts’ dividend forecasts and dividend future prices. The effect of monetary policy on risk premia is analysed using local projections and VAR models. According to the results, monetary policy easing raises the average risk premium. The effect is driven by a rise in long-horizon risk premia.
Keywords: Monetary policy, Stock market, Equity premium
JEL Classification: E52, G12
Suggested Citation: Suggested Citation
