Value investing and monetary policy: Latest evidence from the US.
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School of Business |
Bachelor's thesis
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Authors
Date
2022
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
18+1
Series
Abstract
This paper’s key contribution is to answer whether value stocks can outperform other stocks and create excess returns for investors in an environment where the Federal Reserve exercises contrac-tionary monetary policy to increase interest rates in the US economy. To analyze this, I divide the recent decade into 5 different monetary policy periods during which the federal funds fate has been either rising, falling or staying same. I construct 3 different portfolios based on companies’ book-to-market equity ratios and compare the return performance of these portfolios during these dif-ferent monetary policy periods. The results suggest that value stocks can offer better returns but not without significant increases in portfolio’s risk profile.Description
Thesis advisor
Shin, SeanKeywords
value stocks, monetary policy, interest rates, united states