The Importance of Stock Market Returns in Estimated Monetary Policy Rules: a Structural Approach

This paper estimates a standard version of the New Keynesian Monetary (NKM) model augmented with financial variables in order to analyze the relative importance of stock market returns and term spread in the estimated U.S. monetary policy rule. The estimation procedure implemented is a classical structural method based on the indirect inference principle. The empirical results show that the Fed seems to respond to the macroeconomic outlook and to the stock market return but does not seem to respond to the term spread. Moreover, policy inertia and persistent policy shocks are also significant features of the estimated policy rule.

The Weekend-Dividend Effect in the Spanish Market

Revised: 2006-05

Asset pricing and systematic liquidity risk: an empirical investigation of the Spanish stock market

Systematic liquidity shocks should affect the optimal behavior of agents in financial markets. Indeed, fluctuations in various measures of liquidity are significantly correlated across common stocks. Accordingly, this paper empirically analyzes whether Spanish average returns vary cross-sectionally with betas estimated relative to two competing liquidity risk factors. The first one, proposed by Pastor and Stambaugh (2002), is associated with the strength of volume-related return reversals. Our marketwide liquidity factor is defined as the difference between returns highly sensitive to changes in the relative bid-ask spread and returns with low sensitivities to those changes. Our empirical results show that neither of these proxies for systematic liquidity risk seems to be priced in the Spanish stock market. Further international evidence is deserved.

A factor model of seasonality in stock returns

Published as an article in: The Quarterly Review of Economics and Finance, 2004, vol. 44, issue 2, pages 224-236.

Competing Ecosystem Services: an Assessment of Carbon and Timber in the Tropical Forests of Central America

29 p.