Show me the money: The monetary policy risk premium

• 成果类型: Article
• 署名作者: Ozdagli, Ali; Velikov, Mihail
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Boston; Federal Reserve System - USA; Federal Reserve Bank - Richmond
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.06.012
• 发表日期: 2020
• 页码: 320-339
• 关键词: Monetary policy; asset pricing; Risk factors

摘要

We create a parsimonious monetary policy exposure (MPE) index based on observable firm characteristics that previous studies link to how stocks react to monetary policy. Our index successfully captures stocks' responses to both conventional and unconventional monetary policy. Stocks whose prices react more positively to expansionary monetary policy (high-MPE stocks) earn lower average returns. This result is consistent with the notion that high-MPE stocks provide a hedge against bad economic shocks, to which the Federal Reserve responds with expansionary monetary policy. A long-short trading strategy designed to exploit this effect achieves an annualized Sharpe Ratio of 0.77. (C) 2019 Elsevier B.V. All rights reserved.