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THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY

Yıl 2021, Cilt: 13 Sayı: 1, 52 - 56, 30.07.2021
https://doi.org/10.17261/Pressacademia.2021.1422

Öz

Purpose- Stock market is one of the markets where the effects of monetary policy decisions, which is determined by central banks, are felt quickly. Changes in interest rates enable monetary policy decisions to be transferred to the economy by affecting the stock prices. The purpose of this study is to examine the effect of policy interest rate announcements of Central Bank of Republic of Turkey (CBRT) on stock prices of specific sectors in Istanbul Stock Exchange (ISE) Market.
Methodology- Brown and Warner (1985) event study methodology is used to examine the stock price response of banking and insurance firms traded in ISE. Sample consist of 18 firms which 12 are banks and 6 are insurance firms between January 1, 2015 and December 31, 2020. Monetary policy meeting announcements are taken as the event which are only related to the up movements of policy interest rate. Abnormal returns (AR) and cumulative average abnormal returns (CAAR) are calculated and t-test is applied within the scope of the study.
Findings- Through the sample period there are only three announcements including increase in policy interest rates. Findings show that there is negative price response in banking and insurance firms when the monetary policy interest rates go up.
Conclusion- In this study, the effect of the monetary policy interest rate announcements made by the Central Bank of Republic of Turkey (CBRT) between the years 2015-2020 on the returns of banks and insurance companies was examined by using the event study methodology. According to results of the analysis, it has been determined that the CBRT's decision to raise interest rates has a significant negative effect on banks and insurance firms which are traded in Istanbul Stock Exchange (ISE) market. These findings show that monetary policy announcements in Turkey affects financial markets through the policy rate channel and there is a strong transmission mechanism between them.

Kaynakça

  • Andersson, M. (2007). Using intraday data to gauge financial market responses to Fed and ECB monetary policy decisions. European Central Bank Working Paper Series, 1-36.
  • Bernanke, B. S., & Kuttner, K. N. (2005). What Explains the Stock Market's Reaction to Federal Reserve Policy? Journal of Finance, 1221-1257.
  • Boyd, J. H., Jagannathan, R., & Hu, J. (2005). The Stock Market Reaction to Unemployment News: Why Bad News is Unusually Good for Stocks. Journal of Finance, 1-41.
  • Brown, S. J., & Warner, J. B. (1985). Using Daily Stock Returns: The Case of Event Studies . Journal of Financial Economics, 3-31.
  • Conover, M. C., Jensen, G. R., & Johnson, R. R. (1999). Monetary Environments and International Stock Returns. Journal of Banking and Finance, 1357- 1381.
  • Cook, T., & Hahn, T. (1989). The Effect of Changes in the Federal Funds Rate Target on Market Interest Rates in the 1970s. Journal of Monetary Economics, 1-31.
  • D’Amico, S., & Farka, M. (2002). The Fed and Stock Market: A Proxy and Instrumental Variable Identification. Columbia University, 1-34.
  • Duran, M., Özlü, P., & Ünalmış, D. (2010). TCMB Faiz Kararlarının Hisse Senedi Piyasaları Üzerine Etkisi. Central Bank Review, 1-10.
  • Edelberg, W., & Marshall, D. (1996). Monetary Policy Shocks and Long-Term Interest Rates. Economic Perspectives-Federal Reserve Bank, 1-25.
  • Fair, R. C. (2006). Events That Shook the Market. The Journal of Business, 1-19. Fama, E. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 383-417.
  • Gökalp, B. T. (2017). Beklenen ve Beklenmeyen Para Politikası Kararlarının Hisse Senetleri Fiyatları Üzerindeki Etkileri. Akdeniz İ.İ.B.F. Dergisi, 1-15.
  • He, L. T. (2006). Variations in effects of monetary policy on stock market returns in the past four decades. Review of Financial Economics, 331–349.
  • Jensen, G. R., Mercer, J. M., & Johnsonb, R. R. (1996). Business Conditions, Monetary Policy, and Expected Security Returns. Journal of Financial Economics, 213-237.
  • Rigobon, R., & Sack, B. (2004). The Impact of Monetary Policy on Asset Prices. Journal of Monetary Economics, 1553-1575.
  • Thorbecke, W. (1997). On Stock Market Returns and Monetary Policy. Journal of Finance, 635-654.
  • Vinod, S., Scaria, R., & S, G. (2020). Monetary Policy Announcement and Stock Price Behaviour: An Event Study with Respect to India. International Journal of Scientific and Thecnology Research, 5724-5731.
Yıl 2021, Cilt: 13 Sayı: 1, 52 - 56, 30.07.2021
https://doi.org/10.17261/Pressacademia.2021.1422

Öz

Kaynakça

  • Andersson, M. (2007). Using intraday data to gauge financial market responses to Fed and ECB monetary policy decisions. European Central Bank Working Paper Series, 1-36.
  • Bernanke, B. S., & Kuttner, K. N. (2005). What Explains the Stock Market's Reaction to Federal Reserve Policy? Journal of Finance, 1221-1257.
  • Boyd, J. H., Jagannathan, R., & Hu, J. (2005). The Stock Market Reaction to Unemployment News: Why Bad News is Unusually Good for Stocks. Journal of Finance, 1-41.
  • Brown, S. J., & Warner, J. B. (1985). Using Daily Stock Returns: The Case of Event Studies . Journal of Financial Economics, 3-31.
  • Conover, M. C., Jensen, G. R., & Johnson, R. R. (1999). Monetary Environments and International Stock Returns. Journal of Banking and Finance, 1357- 1381.
  • Cook, T., & Hahn, T. (1989). The Effect of Changes in the Federal Funds Rate Target on Market Interest Rates in the 1970s. Journal of Monetary Economics, 1-31.
  • D’Amico, S., & Farka, M. (2002). The Fed and Stock Market: A Proxy and Instrumental Variable Identification. Columbia University, 1-34.
  • Duran, M., Özlü, P., & Ünalmış, D. (2010). TCMB Faiz Kararlarının Hisse Senedi Piyasaları Üzerine Etkisi. Central Bank Review, 1-10.
  • Edelberg, W., & Marshall, D. (1996). Monetary Policy Shocks and Long-Term Interest Rates. Economic Perspectives-Federal Reserve Bank, 1-25.
  • Fair, R. C. (2006). Events That Shook the Market. The Journal of Business, 1-19. Fama, E. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 383-417.
  • Gökalp, B. T. (2017). Beklenen ve Beklenmeyen Para Politikası Kararlarının Hisse Senetleri Fiyatları Üzerindeki Etkileri. Akdeniz İ.İ.B.F. Dergisi, 1-15.
  • He, L. T. (2006). Variations in effects of monetary policy on stock market returns in the past four decades. Review of Financial Economics, 331–349.
  • Jensen, G. R., Mercer, J. M., & Johnsonb, R. R. (1996). Business Conditions, Monetary Policy, and Expected Security Returns. Journal of Financial Economics, 213-237.
  • Rigobon, R., & Sack, B. (2004). The Impact of Monetary Policy on Asset Prices. Journal of Monetary Economics, 1553-1575.
  • Thorbecke, W. (1997). On Stock Market Returns and Monetary Policy. Journal of Finance, 635-654.
  • Vinod, S., Scaria, R., & S, G. (2020). Monetary Policy Announcement and Stock Price Behaviour: An Event Study with Respect to India. International Journal of Scientific and Thecnology Research, 5724-5731.
Toplam 16 adet kaynakça vardır.

Ayrıntılar

Birincil Dil İngilizce
Konular Finans, İşletme
Bölüm Makaleler
Yazarlar

Sule Baykara 0000-0002-7987-2906

Yayımlanma Tarihi 30 Temmuz 2021
Yayımlandığı Sayı Yıl 2021 Cilt: 13 Sayı: 1

Kaynak Göster

APA Baykara, S. (2021). THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY. PressAcademia Procedia, 13(1), 52-56. https://doi.org/10.17261/Pressacademia.2021.1422
AMA Baykara S. THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY. PAP. Temmuz 2021;13(1):52-56. doi:10.17261/Pressacademia.2021.1422
Chicago Baykara, Sule. “THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY”. PressAcademia Procedia 13, sy. 1 (Temmuz 2021): 52-56. https://doi.org/10.17261/Pressacademia.2021.1422.
EndNote Baykara S (01 Temmuz 2021) THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY. PressAcademia Procedia 13 1 52–56.
IEEE S. Baykara, “THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY”, PAP, c. 13, sy. 1, ss. 52–56, 2021, doi: 10.17261/Pressacademia.2021.1422.
ISNAD Baykara, Sule. “THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY”. PressAcademia Procedia 13/1 (Temmuz 2021), 52-56. https://doi.org/10.17261/Pressacademia.2021.1422.
JAMA Baykara S. THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY. PAP. 2021;13:52–56.
MLA Baykara, Sule. “THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY”. PressAcademia Procedia, c. 13, sy. 1, 2021, ss. 52-56, doi:10.17261/Pressacademia.2021.1422.
Vancouver Baykara S. THE IMPACT OF MONETARY POLICY DECISIONS ON STOCK PRICES: AN EVENT STUDY. PAP. 2021;13(1):52-6.

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