Asset Returns, Discount Rate Changes and Market Efficiency / Michael Smirlock, Jess B. Yawitz.

Format:

Book

Author/Creator:

Smirlock, Michael.

Contributor:

National Bureau of Economic Research.

Yawitz, Jess B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1530.

NBER working paper series no. w1530

Language:

English

Subjects (All):

Interest rates.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1984.

Cambridge, Mass : National Bureau of Economic Research, 1984.

Summary:

The primary purpose of this paper is to reconcile the previous findings of discount rate endogeneity with the presence of discount rate announcement effects in securities markets. The crux of this reconciliation is the dictinction between "technicral" discount rate changes that are endogenous and "non-technical" changes which contain some informative policy implications. In essence, we attempt to separate expected discount rate changes from unexpected changes, or equivalently, the expected component of discount rate changes from the unexpected component. If markets are efficient, the former should have no announcement effects while the latter may be associated with an announcement effect. Accordingly, the focus of the empirical analysis is on the interaction between discount rate exogeneity, the specific monetary policy regime, and announcement effects. In addition, we examine whether the behaviorof these markets in the post-announcement period is consistent with the rapid price adjustment implied by market efficiency.

Notes:

Print version record

December 1984.