A2000
Title: Navigating the euro capital markets amidst monetary policy tightening threats
Authors: Agustin Perez Martin - University Miguel Hernandez of Elche (Spain) [presenting]
Maria Victoria Ferrandez-Serrano - Universidad Miguel Hernandez (Spain)
Pedro Angosto Fernandez - Universidad Miguel Hernandez (Spain)
Helena Bonet Jaen - Universidad Miguel Hernandez (Spain)
Abstract: The connection between shifts in the European Central Bank's (ECB) monetary policies and Eurozone stock markets is studied using an event study strategy. The immediate impact of ECB interest rate increases from 2022 to 2023 is examined utilizing Seemingly Unrelated Regressions (SUR) with 103 sectoral indices from 12 markets. The findings reveal inconsistent and transitory reactions of returns to ECB interest rate announcements. While some significant coefficients are evident, the response direction varies by sector. Notably, the financial industry displays a positive reaction on the day following the second rate hike, but this effect diminishes in subsequent days. The study suggests that Eurozone stock markets' response to ECB interest rate hikes is tumultuous and provides limited information, likely due to ongoing market volatility driven by external factors. Further research is required to fathom the consequences of monetary policy measures in such environments.
