What Do Bank Stock Returns Say About Monetary Policy Transmission? | Metals Mine

  • What Do Bank Stock Returns Say About Monetary Policy Transmission?

    From federalreserve.gov

    In this note, we build on the factor-based asset pricing framework introduced in our companion piece, "Modeling Bank Stock Returns: A Factor-Based Approach" (Ehresmann, Morelli, and Wang, 2025), to examine the transmission of monetary policy (MP) shocks through bank stock returns. Specifically, we explore two core questions. First, we ask how MP shocks affect the systematic risk factors that explain bank stock returns. Second, we study whether the stock price responses to MP shocks differ across banks with varying balance sheet characteristics, such as size, leverage, and funding structures. By doing so, we quantify ... (full story)

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