The Effect of Rise of Federal Funds Rate on US Stock Market: From the Perspective of US Dollar Appreciation

Angela Ruo-yan Zhao

doi:10.54254/2754-1169/43/20232134

Research Article

Open access

Published on 10 November 2023

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Zhao,A.R. (2023). The Effect of Rise of Federal Funds Rate on US Stock Market: From the Perspective of US Dollar Appreciation. Advances in Economics, Management and Political Sciences,43,89-96.

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The Effect of Rise of Federal Funds Rate on US Stock Market: From the Perspective of US Dollar Appreciation

Angela Ruo-yan Zhao *^,1,

¹ University of California San Diego

* Author to whom correspondence should be addressed.

https://doi.org/10.54254/2754-1169/43/20232134

Abstract

The study examines the impact of the rise of the Federal Funds Rate (FFR) on the stock price returns and volatility of the United States of America. The study extracted the stock price from January 3, 2022, to June 16, 2023, from the Investing finance terminal, including the Standard and Poor’s (S&P 500), US Dollar Index, and the National Association of Securities Dealers Automated Quotations (NASDAQ) Index. This study uses the Vector Autoregression (VAR) model and the ARMA-GARCH model to evaluate the stock returns and daily return volatility, respectively. The two models inspect the effect of the US Dollar index on both the NASDAQ and S&P 500. The result of this study suggests that the rise in the Federal Funds Rate would cause the stock market price to decline for a relatively long period. However, the volatility of the daily return remains stable. By studying the effect of the rise in the Federal Funds Rate, policymakers can change the stock prices by adjusting the Federal Funds Rate based on the market’s needs.

Keywords

stock return, volatility, US dollar index, federal funds rate

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References

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Cite this article

Zhao,A.R. (2023). The Effect of Rise of Federal Funds Rate on US Stock Market: From the Perspective of US Dollar Appreciation. Advances in Economics, Management and Political Sciences,43,89-96.

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The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development

Conference website: https://www.icemgd.org/

ISBN：978-1-83558-107-0(Print) / 978-1-83558-108-7(Online)

Conference date: 6 August 2023

Editor：Canh Thien Dang

Series: Advances in Economics, Management and Political Sciences

Volume number: Vol.43

ISSN：2754-1169(Print) / 2754-1177(Online)

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