Monetary policy shocks and the high-frequency network connectedness of stock markets
We study the high-frequency impact of monetary policy decisions on the structure of financial market networks, using 1-second return data for 10 industry-level equity indices in the United States. We find that FOMC meetings and policy surprises have a significant influence on network connectedness in returns, volatility, skewness, and kurtosis. The information related to policy decisions instantly shocks and is quickly dissipated throughout the financial network. Network connectedness shocks are positively impacted by the magnitude of interest rate surprises, with asymmetric effects by sign and nonlinear effects being weak. Our results have implications for monetary policy, systemic risk, and asset pricing.
Authors
- Dan Gabriel Anghel
- Petre Caraiani (ORCID: https://orcid.org/0000-0002-7526-580X)
Institutions
- Institute of Economic Forecasting (RU)
- Bucharest University of Economic Studies (RO)
Publication Details
- Journal
- International Review of Economics & Finance
- Published
- 2024-08-31
- DOI
- https://doi.org/10.1016/j.iref.2024.103558
- Primary Topic
- Market Dynamics and Volatility
- Type
- article
- Field-Weighted Citation Impact
- 0.00
Funders
- Corporation for National and Community Service
- Unitatea Executiva pentru Finantarea Invatamantului Superior, a Cercetarii, Dezvoltarii si Inovarii
- Ministry of Education and Research, Romania