The Validity of the Event-study Approach

Evidence from the Impact of the Fed's Monetary Policy on US and Foreign Asset Prices

Bibliographic Data

ID9726666
AuthorsCarlo Rosa (0000-0001-8361-9009, UCLouvain, corresponding author)
Year2011
Volume78
Issue311
Pages429-439
Publication date2011-07-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/j.1468-0335.2009.00828.x
OpenAlexW1836049978
LanguageEN
Citations received1
References cited20

This paper documents the effects of changes in US monetary policy on asset prices in 51 countries to evaluate the validity of the event-study approach. We find that the event-study estimates contain a significant bias. However, this bias is fairly small and the ordinary least squares approach tends to outperform in an expected squared error sense the heteroscedasticity-based estimator for both small and large sample sizes. Hence in general the event-study methodology should be preferred. Moreover, we show that US monetary policy has been an important determinant of global financial markets. © The Author. Economica © 2009 The London School of Economics and Political Science

Asset (computer security) · Capital asset pricing model · Econometrics · Economics · Estimator · Event (particle physics) · Event study · Financial economics · Heteroscedasticity · Monetary economics · Monetary policy · Ordinary least squares · Sample (material) · Statistics · Computer Science · Financial Markets and Investment Strategies · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact

Tools

Open DOISci-Hub