TY  - JOUR
AU  - Bernanke,Ben S.
AU  - Kuttner,Kenneth N.
TI  - What Explains the Stock Market's Reaction to Federal Reserve Policy?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10402
PY  - 2004
Y2  - April 2004
UR  - http://www.nber.org/papers/w10402
L1  - http://www.nber.org/papers/w10402.pdf
N1  - Author contact info:
Ben S. Bernanke
E-Mail: Rita.C.Proctor@frb.gov

Kenneth Kuttner
Department of Economics
Williams College
South Academic Building
24 Hopkins Hall Drive
Williamstown, MA 01267
Tel: 413-597-2300
E-Mail: kenneth.n.kuttner@williams.edu
AB  - This paper analyzes the impact of changes in monetary policy on equity prices, with the objectives both of measuring the average reaction of the stock market and also of understanding the economic sources of that reaction. We find that, on average, a hypothetical unanticipated 25-basis-point cut in the federal funds rate target is associated with about a one percent increase in broad stock indexes. Adapting a methodology due to Campbell (1991) and Campbell and Ammer (1993), we find that the effects of unanticipated monetary policy actions on expected excess returns account for the largest part of the response of stock prices.
ER  -