Monetary Policy and the Stock Market: Empirical Evidence from the UK - Dissertation Example

Only on StudentShare

Extract of sample
Monetary Policy and the Stock Market: Empirical Evidence from the UK

1. INTRODUCTION: 1.1. Overview and Background of the Research Study: Different research studies have been conducted in order to identify and explore the relationship between the monetary policy and stock market. The central bank has always been under pressure to come up with appropriate monetary policy in order to regulate inflation and output gap in the economy. It is important to explore and understand the relationship between monetary policy and other important economic indicators. For this purpose, one should first able to comprehend the main concept of monetary policy and important components of monetary policy. The monetary policy is devised in order to control the supply of the money in the economy. The monetary policy is formulated by the central bank or other regulatory bodies, which decides about the amount and growth of the money supply in the economy. This is done with the help of increasing or decreasing the interest rate or altering the amount of money which the banks can hold i.e. bank reserves. It is important to establish here that the interest rate is decided on the basis of the different factors and elements like inflation rate and the economic development or level of output within a particular economy. ...
Download paper

Summary

Abstract This research report identifies and analyses the relationship between the monetary policy and return of the stock market. Taylor rule has been used to analyse and test the relationship between the monetary policy and volatility in the stock return…
Author : orntara

Related Essays

Monetary Policy and the Stock Market
Stock market fluctuations often decide the financial state of an economy. These, in turn, could act as the decisive forces behind the monetary policy framework of an economy. Movements adapted by stock market indices often reflect the behaviour patterns exhibited by many essential economic variables. Stock market indices might be regarded as a mirror image of the way their components behave over time. In case that these components exhibit an average upward trend, the implication is that of a rising stock price index, while they display a downward trend implies the stock prices moving down on...
24 pages (6024 words) Essay
Stock Market Efficiency
The intention of this study is the capital market that provides a conducive and convenient venue for the investors that can be either organizations or individual entities to buy and sell shares and bonds in the form of stock exchange on a local and worldwide basis. Due to the advancement in technologies, the world has become a place where human being can travel and reach any destination within no time. Therefore, this has also provided an opportunity for the overseas institutions to participate in the trading activities of the stock exchange based in the vicinity. However, with reference to...
33 pages (8283 words) Dissertation
Monetary Policy and the Stock Market: Study of Japan and the United States
Its goods are sold internally as well as externally competing against products that are sourced from other countries. Japan’s economy is heavily dependent on the activities generated by its export and import industry. In fact, Japan’s basic needs are supplied by its imports while the country’s economic wealth is supported by the export of Japan’s industries. This thesis will show that the Taylor rule can also be used effectively in any kind of economic activity to ensure that proper modeling can be achieved to sustain a monetary policy if not form them according to the result of the...
24 pages (6024 words) Dissertation
Monetary policy and Stock Market
Further, in reference to the goal of price stability, whether prices of assets should be within the purview of stabilization goals is a contended issue. As Alan Greenspan (1996) pointed out, it is unclear regarding which prices really matter. Prices of goods and services in current circulation which constitutes the current inflation figures are definitely critical for the long term stable growth of the economy, but do prices of goods or services to be produced in future, or rather prices of assets which are essentially claims on goods and services to be produced in the future also warrant such...
20 pages (5020 words) Dissertation
ARCH modeling: forecasting the return in the UK stock market
On the other hand, the index helps ARCH models to bring forth exact forecasts for out-of-sample forecasting on considering performance measures. This study would help to develop an investing strategy based on the results that would bring about significant positive returns. Keywords: ARCH Models, Stock index volatility, Predictive ability, ARCH modeling: forecasting the return in the UK stock market Introduction There have been quite a number of studies which show that different parameters of ARCH models offer good estimates of equity returns. The compatibility of ARCH models are evident in...
42 pages (10542 words) Dissertation
Monetary Policy and the Stock Market: Empirical Evidence from Nigeria
The major findings include the impact of long run monetary policy on the stock market returns of Nigeria. The stock market returns get reduced because of high rate of Treasury Bill. This provides the evidence that efforts in monetary policy contributes in slowing down the economy. The returns in stock market witness a positive effect from current interest rate and interest rate lagged by one period. The sign of lagged error correction is negative. The feature of the variance decomposition results is that the sources of fluctuations of returns are largely due to shocks in stock market as well...
4 pages (1004 words) Research Proposal
Monetary Policy and the Stock Market
And for bankers and financial managers who wants to exercise prudence and responsible banking it would be wise to work with monetary authorities to ensure that the monetary policy is supported unequivocally. Money or currency is the government of the country’s commitment to its holder that the money can be traded in exchange for goods in the country. Meanwhile the true value of money is dependent on several factors such as the actual value of the goods that can be bought by the money or its value as compared with other currencies. However, given that these factors are also dependent on other...
4 pages (1004 words) Dissertation
Got a tricky question? Receive an answer from students like you! Try us!