واکنش شاخصهای سهام جهانی به اطلاعیه های سیاست های پولی آمریکا

This paper analyzes the impact of U.S. monetary policy announcement surprises on 15 foreign equity indexes in Asia, Europe, and Latin America. Using high-frequency data, I find a large and significant response of foreign equity indexes to U.S. monetary policy surprises at short time horizons. On average, a hypothetical unanticipated 25-basis-point cut in the federal funds target rate is associated with a ½– 2½% increase in foreign equity indexes. This paper also provides evidence that U.S. monetary policy surprises, and by extension changes in U.S. interest rates, affect foreign equity indexes through their discount rate component. This finding suggests that U.S. monetary policy may be a risk factor in global equity markets.

Extensive studies have documented the influence of U.S. monetary policy on U.S. asset prices (e.g., Cook and Hahn, 1989, Jensen and Johnson, 1995, Patelis, 1997 and Kuttner, 2001). Some studies suggest that U.S. monetary policy is a risk factor in U.S. equity markets (e.g., Jensen et al., 1996 and Thorbecke, 1997). Recently, Bernanke and Kuttner (2005) show that U.S. monetary policy surprises affect U.S. equity markets mainly through their effects on risk premiums. The importance of U.S. monetary policy for financial markets is also indicated by the amount of private sector resources devoted to predicting future Federal Open Market Committee (FOMC)'s decisions. In contrast, there are only a few studies that have examined the relationship between U.S. monetary policy and foreign asset prices (e.g., Husted and Kitchen, 1985, Johnson and Jensen, 1993 and Ehrmann and Fratzscher, 2002). This relationship is important for several reasons. First, from an asset pricing perspective, studying international markets will help to determine whether a more diverse set of assets is influenced by U.S. monetary policy. If U.S. monetary policy affects foreign assets, this supports the view that U.S. monetary policy may be a risk factor in global financial markets. Second, the relationship between U.S. monetary policy and foreign asset prices is the most direct and immediate way we can measure the influence of U.S. monetary policy on foreign economies. In addition, since monetary policy impacts the real economy through financial markets, it is important for both U.S. and foreign policy makers and market participants to have quantitative estimates of the links between monetary policy and foreign asset prices.1 Previous studies examine the response of foreign asset prices to weekly Federal Reserve's money supply announcements during the late 1970s and early 1980s when the Federal Reserve targeted the growth of the money supply (e.g., Husted and Kitchen, 1985 and Bailey, 1990). Other studies examine foreign asset prices' responses to discount rate announcements (e.g., Mudd, 1979 and Johnson and Jensen, 1993). These studies use daily returns to examine asset prices' reactions, but because of time zone differences the event window sometimes is as wide as three days (i.e., when the announcement occurred on Friday in the United States), making it hard to separate the effects of U.S. monetary policy from the effects of other unrelated news. Since the Federal Reserve began using the target federal funds rate as a main policy tool in the late-1980s, recent studies have focused on the effect of target federal funds rate surprises on foreign asset prices. However, existing work focuses only on a few developed countries (e.g., Ehrmann and Fratzscher, 2002 and Andersen et al., 2003), which make the findings hard to generalize. This paper examines the impact of FOMC announcement surprises on 15 foreign equity indexes, including both developed and emerging market countries, between September 1998 and November 2004. This paper focuses on equity markets because they are the most liquid asset markets for all countries in the sample. The choice of the countries in the sample is restricted by intraday high-frequency data availability. This paper also explores why foreign equities respond to FOMC announcements. To distinguish between the effect of FOMC announcements on the cash flow and the discount rate components of foreign equities, I relate the size of each country's response to the country's real (proxy for cash flow) and financial (proxy for discount rate) linkages with the United States. This is important because if U.S. monetary policy affects foreign asset prices through the discount rate component, it will provide more evidence consistent with the role of U.S. monetary policy as a risk factor in global equity markets. This paper extends the existing literature in four dimensions. First, I use high-frequency intraday data to examine the response of foreign equity indexes to FOMC announcements in a narrow window: 1-h for equity markets in the Western Hemisphere and close-to-open (overnight) for equity markets in Asia and Europe. The narrow window helps to isolate the effect of FOMC announcements from the effects of other unrelated news, making the estimates more precise and improving the ability to relate the cross-country variation in the response to proxies for real economic and financial linkages. To my knowledge, this is the first paper to study the response of global equity indexes to FOMC announcements using high-frequency data that cover both developed and emerging economies. I only focus on equity market reactions around FOMC announcements because I want to measure equity market responses that are driven exogenously by monetary policy surprises.2 Of course, surprises about U.S. monetary policy do not occur only at FOMC meetings (both scheduled and intermeeting), but also happen because of speeches or remarks from members of the FOMC (e.g., the Chairman's semi-annual testimony before Congress). However, it is harder to isolate the effect of monetary policy surprises around these events as event windows vary across events and are generally wider. Because I ignore non-meeting surprises, the numbers I report are a lower bound of the economic significance of the impact of U.S. monetary policy on foreign equity markets. Second, this paper uses two proxies for U.S. monetary policy surprises as opposed to the single proxy used in most studies. Gürkaynak et al. (2005) provide evidence that two factors are needed to capture monetary policy surprises, one for the current target rate (target surprise) and another for the expected path of future monetary policy (path surprise). The path surprise is generally related to the accompanying statement. Gürkaynak et al. (2005) provide evidence that yields on 5- and 10-year treasury notes react mostly to the path surprise, while U.S. equity indexes react only to the target surprise. The target surprise is defined as the difference between the announced target federal funds rate and expectations derived from fed funds futures contracts. 3 The path surprise is defined as the component of the change in 1-year-ahead eurodollar interest rate futures that is uncorrelated with the target surprise. The path surprise is intended to proxy for news that market participants have learned from the FOMC's statement about the expected future path of monetary policy over and above what they have learned about the level of the target rate. Third, this paper attempts to understand the reasons for foreign equity indexes' responses to U.S. monetary policy, an issue that has been little explored. To understand the response, I relate the cross-country variation in the response to proxies for the cash flow component (real economic linkages with the United States) and the discount rate component (financial linkages with the United States).4 This paper also uses two new measures of financial integration. Thomas et al. (2006) construct U.S. investors' bilateral holdings of foreign equities for the past 25 years. To measure each country's degree of financial integration with the United States, I use the percentage of equity market capitalization in each country that is held by U.S. investors. This measure is available at a monthly frequency, and it covers 44 countries in both developed and emerging markets. Another new measure of financial integration is the percentage of equity market capitalization in each country that is held by foreign investors. The IMF's Portfolio Investment: Coordinated Portfolio Investment Survey collected annual data on equity holdings of foreign investors from 2001 to 2004. This measure captures a dimension of overall financial integration with the rest of the world, as opposed to only with the United States. 5 Fourth, this paper introduces a novel way to control for other news unrelated to FOMC announcements that may influence overnight returns of Asian and European equity indexes (e.g., U.S. earnings announcements). I control for such news by using the net of FOMC effect return in the S&P 500 index futures. The net of FOMC effect return is computed as the logarithmic change in S&P 500 index futures between the close of each country's equity market prior to the FOMC announcement and the following morning's open, excluding the component of the change that occurs in a 1-h window around the FOMC announcement.The main findings can be summarized as follows. First, I find that foreign equity markets do respond to FOMC announcements and, like the U.S. equity market, they respond mainly to the target surprise. For example, a hypothetical unanticipated 25-basis-point cut in the fed funds target rate is associated with about a 1⁄2 % increase in the Malaysian equity index, a 13⁄4 % increase in the U.S. equity index, and 21⁄2 % increases in the Hong Kong and the Korean equity indexes.6 I also find that equity markets in both developed and emerging economies incorporate news about U.S. monetary policy surprises very quickly (less than 15 min).7 The rapid incorporation of news effects is consistent with empirical evidence from various developed-economy financial markets (e.g., Ederington and Lee, 1993; Fleming and Remolona, 1999; Andersen et al., 2003, 2007).8 In addition, equity markets in Argentina, Mexico, Hong Kong, Korea, and Taiwan respond to the path surprise – new evidence that the statement accompanying the FOMC announcement also influences equity prices. This finding implies that previous studies that use only the target surprise as a proxy for monetary policy surprises may underestimate the effect of U.S. monetary policy.9 Second, I find that the size of the equity market response varies greatly across countries and that these differences are statistically significant (e.g., small statistically significant response in Malaysia and very large responses in Hong Kong and Korea.). The cross-country response variation is more related to proxies for financial integration with the United States than it is to proxies for real economic integration. The cross-country variation in the response is also highly correlated with the CAPM beta. This finding provides indirect evidence that U.S. monetary policy influences the discount rate component of foreign equity prices and adds to evidence from U.S. equity markets suggesting that U.S. monetary policy may be a risk factor in global equity markets. A policy implication of this finding is that a country may be able to insulate itself from the effects of foreign monetary shocks by limiting its international financial linkages (e.g., Malaysia’s capital controls). However, such limits also may have undesirable effects. The remainder of the paper is organized as follows. Section 2 describes the data sources. Section 3 describes testable hypotheses, empirical models, and empirical results. Section 4 examines why foreign equity indexes respond to FOMC announcements. Section 5 presents a conclusion and a discussion of the implications of my finding.