Economic Papers

  1. Publications
  2. Other Publications
  3. Economic Papers

Monetary Policy and the Stock Market: Intraday Transaction Data Analysis(EP Vol.10 No.1)

연구조정실 (02-759-5407) 2007.10.04 7367

Monetary Policy and the Stock Market: Intraday Transaction Data Analysis

Author: Wook Sohn(KDI School of Public Policy and Management) and Yunsung Eom(Graduate School of Business Administration)

This paper analyzes intraday transactions in the Korean stock market to
investigate the impact of policy signals - statements of the authorities about
the future direction of monetary policy - on returns, volatility and trading
volume (trading value) in the stock market. The stock market responds not
only to change of the overnight call target rate but also to pronouncements
indicating the future monetary policy stance. The impact is largest just
before and just after policy signals, which suggests that the stock market
moves efficiently to incorporate its expectations of monetary policy in
pricing and transaction behavior. Stock market volatility increases around
the time of monetary policy announcements, yet regular announcements act
as a factor making for reduced volatility. This result implies that stock
market volatility can be reduced by making regular announcements. Foreign
investors show different patterns in their trading response to the monetary
policy announcements to those of individual and domestic institutional
investors. Finally, in relation to the impact of the characteristics of
individual issues on the stock market, the riskier and the smaller a company
is, the greater the degree of volatility of its stock price.

Go to Top