Security markets and the information content of monetary policy turning points

Gerald R. Jensen, Jeffrey M. Mercer

Research output: Contribution to journalArticlepeer-review

7 Scopus citations


Substantial evidence shows that a significant relationship exists between Federal Reserve monetary policy signals and subsequent security returns. Recent evidence, however, suggests that Fed rate changes do not signal shifts in monetary policy and therefore have no real policy significance. In this study, we investigate whether certain Fed signals, characterized as turning points in the monetary cycle, have real policy significance. Our evidence suggests that the Fed's signal that a turning point is occurring is unambiguous, predicts a substantial shift in Fed monetary policy, and provides costless and meaningful information about future security market returns.

Original languageEnglish
Pages (from-to)477-494
Number of pages18
JournalQuarterly Review of Economics and Finance
Issue number4
StatePublished - Sep 2006


  • Discount rate
  • Monetary policy
  • Security returns


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