Prior studies examining the impact of monetary policy instruments on the equity market have produced mixed results. This problem is important to address because of the substantial impact of monetary policy on the economy and economic resource allocation via the equity market. The purpose of this study was to determine the impact of change in money supply (M2), change in Federal Funds Rate (FFR), and change in Federal Funds Futures (FFF) on the expected rate of returns of publicly traded companies while controlling for the rate of return of the whole equity market and size of the sampled companies. The capital asset pricing model formed the theoretical foundation. The research questions addressed the significance of the monetary policy instruments M2, FFR, and FFF on the expected rate of returns of publicly traded companies. The research design was ex post facto. To answer the research questions, annual data were collected for the period of January 2005 through January 2015 for the rate of return on the overall equity market, rate of return on stocks of 90 publicly traded companies, size of the sample companies, M2, FFR, and FFF. A multiple regression showed a positive effect of market rate of return and company size, a positive moderation effect of M2, and a negative moderation and mediation effect of FFR and FFF on the expected rate of returns of publicly traded companies (p < .05). These findings could have positive social change implications in that they may help individual and institutional investors in their investment decision making, leading to better allocation of economic resources. The findings may also assist monetary policy authorities in assessing the impact of monetary policy on the equity market and thus preempting stock market crashes.

This thesis contains four chapters, each of which examines different aspects of the uncertainty facing monetary policymakers.''Monetary policy and market interest rates'' investigates how interest rates set on financial markets respond to policy actions taken by the monetary authorities. The reaction of market rates is shown to depend crucially on market participants' interpretation of the factors underlying the policy move. These theoretical predictions find support in an empirical analysis of the U.S. financial markets.''Predicting monetary policy using federal funds futures prices'' examines how prices of federal funds futures contracts can be used to predict policy moves by the Federal Reserve. Although the futures prices exhibit systematic variation across trading days and calendar months, they are shown to be fairly successful in predicting the federal funds rate target that will prevailafter the next meeting of the Federal Open Market Committee from 1994 to 1998.''Monetary policy with uncertain parameters'' examines the effects  of parameter uncertainty on the optimal monetary policy strategy. Under certain parameter configurations, increasing uncertainty is shown to lead to more aggressive policy, in contrast to the accepted wisdom.''Should central banks be more aggressive?'' examines why a certain class of monetary policy models leads to more aggressive policy prescriptions than what is observed in reality. These counterfactual results are shown to be due to model restrictions rather than central banks being too cautious in their policy behavior. An unrestricted model, taking the dynamics of the economy and multiplicative parameter uncertainty into account, leads to optimal policy prescriptions which are very close to observed Federal Reserve behavior. / <p>Diss. Stockholm : Handelshögskolan, 1999</p>