The role of monetary policy uncertainty in predicting equity market volatility of the United Kingdom: evidence from over 150 years of data

Authors

  • Rangan Gupta
  • Mark Wohar

DOI:

https://doi.org/10.17811/ebl.8.3.2019.138-146

Abstract

Theory suggests a strong link between monetary policy rate uncertainty and equity return volatility, since asset pricing models assume the risk-free rate to be a key factor for equity prices. Given this, our paper uses historical monthly data for the United Kingdom over 1833:01 to 2018:07, to show that monetary policy uncertainty increases stock market volatility within sample. In addition, we show that the information on monetary policy uncertainty also adds value to forecasting out-of-sample equity market volatility.

 

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Published

2019-11-26

How to Cite

Gupta, R., & Wohar, M. (2019). The role of monetary policy uncertainty in predicting equity market volatility of the United Kingdom: evidence from over 150 years of data. Economics and Business Letters, 8(3), 138–146. https://doi.org/10.17811/ebl.8.3.2019.138-146

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Articles