Empirical Analysis on Unexpected Information Effect of Monetary Policy and Stock Price Fluctuation: Taking Military and Defense Enterprises as an Example

Abstract

The existing studies have shown that the unexpected information effect of monetary policy (IEOMP) would affect the fluctuation of stock prices. This paper tests the effect of unexpected IEOMP on stock prices in China. Taking Chinese listed military and defense enterprises, for example, the author further explored how the influence of unexpected IEOMP over stock price varies between industries. The empirical analysis reveals that, despite the industrial heterogeneity of the said influence in China, the stock price of Chinese listed military and defense enterprises is still affected by unexpected IEOMP. Our analysis enables Chinese military and defense enterprises to build a more robust market mechanism for the military and defense market, open more effective channels for the industrial chain, capital chain, and private capital, and drive the national economy with the sci-tech results of defense. In addition, policymakers are recommended to keep an eye on the price fluctuation in the stock market and important economic information from stock price fluctuation in order to effectively identify the potential risks in the future economy and to improve the predictability of the feedback mechanism of monetary policy.