Unconventional monetary policy and the stock market's reaction to Federal Reserve policy actions

Ozan Eksi, Bedri Kamil Onur Tas*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)


We examine the change in the effect of Federal Reserve's policy actions on stock returns after the Fed started to use unconventional policy actions. We find that the response of stock returns to monetary policy actions are almost seven times higher after the federal funds rate hit the zero lower bound. We conduct additional analysis to examine the underlying causes of the increase in the impact of monetary policy actions of stock returns. We show that investors rebalance their portfolios towards equity after selling Treasury securities to the Federal Reserve during large scale asset purchases.

Original languageEnglish
Pages (from-to)136-147
Number of pages12
JournalNorth American Journal of Economics and Finance
Publication statusPublished - Apr 1 2017
Externally publishedYes


  • LSAP
  • Monetary policy
  • Stock market
  • Zero lower bound

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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