Bank Stock Returns and Monetary Policy Surprises: Before and After the Financial Crisis
Sammanfattning: Using daily bank stock data and quarterly balance sheet data, we estimate the reaction of bank stock returns and maturity mismatches to surprise changes in the federal funds rate and the slope of the yield curve on FOMC dates, before and after the financial crisis of 2008. We find that the reaction of U.S. bank holding companies' stock returns to unexpected increases in the federal funds rate and the slope of the yield curve has reversed after the financial crisis, being a positive reaction in the post-crisis period. The reaction of bank stock returns to interest rate changes appears to be amplified for larger banks both before and after the financial crisis. Our results also indicate that banks' maturity mismatches increase following surprise increases in the interest rate in the post-crisis period, which is also a reversed effect. The results in this paper support the notion of a reversal interest rate in the United States.
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