The Impact of Policy Rate Changes on Sectoral Stock Returns in Sweden

Sammanfattning

This thesis examines how changes in the Swedish policy rate affect sectoral stock returns in the banking, real estate, and service sectors during the period 2012–2024. Using monthly sector-level data and regression-based analysis, we study whether monetary policy has heterogeneous effects across sectors with differing financial structures and interest rate exposure. The analysis covers both the prolonged low-interest-rate environment following the global financial crisis and the subsequent period of rapid monetary tightening beginning in 2022. Contrary to theoretical expectations that interest-rate-sensitive sectors should respond more strongly to policy changes, our results show no statistically significant direct effect of policy rate changes on sectoral stock returns at a monthly frequency. This finding is robust across alternative measures of monetary policy, including expected policy rates, short-term money market rates, policy rate spreads, interaction terms, and policy rate shocks. Instead, sectoral returns are primarily driven by overall market movements, as captured by the Swedish stock market index. We argue that these results reflect a high degree of market efficiency, where monetary policy information is rapidly anticipated and incorporated into asset prices. Overall, the findings suggest that short-run, sector-specific stock return responses to policy rate changes are limited in the Swedish market. This study contributes to the literature by providing a comparative, sector-level perspective on monetary policy transmission using recent data that spans multiple monetary regimes.