Ezra Polesky, Occidental College
This paper examines the impact of monetary policy announcements on equity markets, with a particular focus on how dynamics have shifted since the rise of forward guidance. A new method is used to estimate the surprise component of monetary policy announcements. Notably, this paper finds that with the rise of forward guidance, equity markets demonstrate heightened sensitivity to surprise monetary policy announcements. Capital-intensive and cyclical industries are the most responsive segments of the market to surprise monetary policy announcements, both before and after the rise of forward guidance.
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