Journal of Applied Finance & Banking

How does reserve ratio decreasing act on market: Empirical evidence from China

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  • Abstract 

    This paper tests whether macro monetary shock will influence stock market. Employing approaches of event study and abnormal returns regression, this paper finds that reserve ratio decreasing does lead to positive abnormal returns, but it works through different channels in each event. Further analyzing shows that characteristics of the stock market of China make the differences: market overreacts to unexpected shock and underreacts to expectable event.

    JEL classification numbersE44 E52 G14
    Keywords: Reserve ratio decreasing, Stock returns, Event study