Research on Impact of Monetary Policy Adjustments on Stock Return Volatility of A-share Securities Companies

Abstract

As the connection between China's monetary policy and the capital market has become increasingly close, the People's Bank of China created the "Securities, Funds, and Insurance Companies Swap Facility (SFISF)" and other structural monetary policy tools directly targeting the capital market in 2024. This policy innovation provides a rare "quasi-natural experiment" scenario for studying the transmission mechanism of how monetary policy affects stock market volatility through investor sentiment. This paper aims to construct a comprehensive analytical framework of "structural monetary policy shock - stock return volatility", taking the first 17 listed securities companies participating in the "Securities, Funds, and Insurance Companies Swap Facility" operation as samples, and uses the event study method to systematically evaluate the market effect of the policy shock. The research finds that the policy announcement generated a significant short-term positive shock. The sample securities companies obtained significant positive abnormal returns within the event window, and large securities companies had a faster short-term response and higher returns, while small and medium-sized securities companies had greater long-term volatility and were more sensitive to risk exposure, showing obvious scale heterogeneity.