Monetary policy and stock valuation: Structural VAR identification and size effects

his paper examines the relationship between the US monetary policy and stock valuation using a structural VAR framework that allows for the simultaneous interaction between the federal funds rate and stock market developments based on the assumption of long-run monetary neutrality. The results confirm a strong, negative and significant monetary policy tightening effect on real stock prices. Furthermore, we provide evidence consistent with a delayed response of small stocks to monetary policy shocks relative to large stocks

New insights into the genetic etiology of Alzheimer's disease and related dementias

Characterization of the genetic landscape of Alzheimer's disease (AD) and related dementias (ADD) provides a unique opportunity for a better understanding of the associated pathophysiological processes. We performed a two-stage genome-wide association study totaling 111,326 clinically diagnosed/'proxy' AD cases and 677,663 controls. We found 75 risk loci, of which 42 were new at the time of analysis. Pathway enrichment analyses confirmed the involvement of amyloid/tau pathways and highlighted microglia implication. Gene prioritization in the new loci identified 31 genes that were suggestive of new genetically associated processes, including the tumor necrosis factor alpha pathway through the linear ubiquitin chain assembly complex. We also built a new genetic risk score associated with the risk of future AD/dementia or progression from mild cognitive impairment to AD/dementia. The improvement in prediction led to a 1.6- to 1.9-fold increase in AD risk from the lowest to the highest decile, in addition to effects of age and the APOE ε4 allele

Financial stability and the Fed

This article retraces how financial stability considerations interacted with US monetary policy before and during the Great Recession. Using text-mining techniques, this article innovates by constructing indicators for financial stability sentiment expressed during testimonies of five Federal Reserve Chairs. Including these text-based measures adds explanatory power to Taylor-rule models. Negative financial stability sentiment coincided with a more accommodative monetary policy stance than implied by standard Taylor-rule factors, even during the decades before the Great Recession. These findings are consistent with a preference for monetary policy reacting to financial instability rather than acting pre-emptively to a perceived build-up of risks

Asset Prices in the Measurement of Inflation

The debate over including asset prices in the construction of an inflation statistic has attracted renewed attention in recent years. Virtually all of this (and earlier) work on incorporating asset prices into an aggregate price statistic has been motivated by a presumed, but unidentified transmission mechanism through which asset prices are leading indicators of inflation at the retail level. In this paper, we take an alternative, longer-term perspective on the issue and argue that the exclusion of asset prices introduces an "excluded goods bias" in the computation of the inflation statistic that is of interest to the monetary authority. We implement this idea using a relatively modern statistical technique, a dynamic factor index. This statistical algorithm allows us to see through the excessively "noisy" asset price data that have frustrated earlier researchers who have attempted to integrate these prices into an aggregate measure. We find that the failure to include asset prices in the aggregate price statistic has introduced a downward bias in the U.S. Consumer Price Index on the order of magnitude of roughly ¼ percentage point annually. Of the three broad assets categories considered here-- equities, bonds, and houses--we find that the failure to include housing prices resulted in the largest potential measurement error. This conclusion is also supported by a cursory look at some cross-country evidence.Asset Prices, Inflation Measurement, Excluded Goods Bias, and Dynamic Factor Index.

Can Market Incompleteness Resolve Asset Pricing Puzzles?

This paper shows that the presence of persistent uninsurable risk concentrated in economic depressions has the potential to resolve two well-known asset pricing puzzles. It is also shown that the presence of such risk in more normal economic expansions and recessions is likely to be much less relevant in determining equilibrium asset prices. Copyright Blackwell Publishing Ltd, 2004.

Asset prices and central bank policy

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