Monetary environments and stock returns: international evidence based on the quantile regression technique

Chevapatrakul, Thanaset

Abstract

This paper investigates the impact of the local and the US monetary policy environments on stock returns at the different locations on the return distributions. Using data for stock returns and interest rates of 30 countries, the quantile regression technique is employed to estimate the sensitivity of the returns to monetary policy at the different points on the return distributions. The results suggest that higher returns are associated with expansionary monetary policy. Furthermore, some of the stock markets in the sample are found to react to the local, but not the US monetary environments at the lower quantiles while the response at the higher quantiles appears to be sensitive to the US, but not the local monetary conditions. These findings are further supported by the slope equality tests, discussed in Koenker & Bassett (1982), and the analysis of weighted absolute residuals (ANOWAR), proposed by Chen, Ying, Zhang, & Zhao (2008).

Citation

Chevapatrakul, T. (2015). Monetary environments and stock returns: international evidence based on the quantile regression technique. International Review of Financial Analysis, 38, 83-108. doi:10.1016/j.irfa.2015.01.013

• Journal Article Type: Article
• Acceptance Date: Jan 23, 2015
• Online Publication Date: Feb 3, 2016
• Publication Date: Mar 31, 2015
• Deposit Date: Aug 23, 2016
• Print ISSN: 1057-5219
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 38
• Pages: 83-108
• DOI: https://doi.org/10.1016/j.irfa.2015.01.013
• Public URL: https://nottingham-repository.worktribe.com/output/1101626
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S1057521915000241?via%3Dihub