Resumen de Asymmetric effects of monetary policy changes on hospitality stock performance
The literature has documented a significant effect of monetary policy changes on hospitality stock returns. Extending the current hospitality literature, this paper tests asymmetric effects of Federal Reserve (Fed) monetary policy changes on long-term US hospitality index returns (HIRs) in bull and bear markets. Monetary policy changes are measured by directional changes in the discount rate (dr) and in the federal funds rate (ffr). This study uses a Markov regime-switching model of stock returns to identify bull and bear stock market conditions. The test results bring new evidence to the hospitality literature. The significant effects of both dr and ffr on all five HIRs exist only in bear markets over the 36-year period from January 1973 to May 2008. In addition, after controlling for all three different macroeconomic conditions, asymmetry in the impact of both dr and ffr remains robust in bear markets, but not in business cycle contractions or under tight credit market conditions. The findings support the credit channel of monetary policy transmission mechanism by showing that characteristics of hospitality sectors interact with stock market conditions to determine the impact of Fed policy changes on HIRs
