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.

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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

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article

Monetary policy shocks and the high-frequency network connectedness of stock markets

Dan Gabriel Anghel, Petre Caraiani
International Review of Economics & Finance
Market Dynamics and Volatility
article

Monetary policy shocks and the high-frequency network connectedness of stock markets

Dan Gabriel Anghel, Petre Caraiani
article en

Abstract

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.

International Review of Economics & FinanceVol. 96
Institute of Economic Forecasting (RU), Bucharest University of Economic Studies (RO)
Corporation for National and Community Service, Unitatea Executiva pentru Finantarea Invatamantului Superior, a Cercetarii, Dezvoltarii si Inovarii, Ministry of Education and Research, Romania
Openalex Percentile: Top 82%
Market Dynamics and Volatility
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Monetary policy shocks and the high-frequency network connectedness of stock markets — Dan Gabriel Anghel, Petre Caraiani · International Review of Economics & Finance (2024) | TGRS Research Map | TGRS