Policy and volatility of asset returns

Article Abstract:

A study of financial market volatility suggests that central bank policy responds actively to volatility in both exchange rates and short-term interest rates, and policy also appears to diminish asset returns volatility. The two policy actions examined are domestic open market operations and sterilized foreign exchange intervention activity, the two being highly visible policy activities carried out by the Federal Reserve. The reduction in volatility in the foreign exchange market resulting from policy appears to last longer than reduced volatility in interest rates.

Noncommercial research organizations, Interest rates, Monetary policy

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A case study of the impact of monetary policy on exchange rates

Article Abstract:

An examination of the effects of a new direction in monetary policy from October 1979 indicates that this had a major impact on exchange rate decline between 1979 and 1982, and contributed to increased exchange rate volatility. The study employed nonparametric testing methods, and the results suggests that there were inefficiencies. The findings appear to back a Keynsian-Hicksian and an asset market approach, given specific assumptions, rather than a monetarist perspective.

Commercial nonphysical research

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Hypothesis testing in event studies: the case of variance changes

Article Abstract:

The derivation of a test statistic that attempts to measure and account for the impact of financial events on asset returns is undertaken according to such criteria as robustness and similarity to earlier tests such as those using the least squares method. The derived technique is based on the jackknife approach and is best used when events cannot be known in advance and information is only selectively released.

Research, Usage, Statistical hypothesis testing, Heteroscedasticity

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