Monetary Policy Transmission to the Technology Sector: An SVAR Analysis of the Nasdaq-100 (1999– 2024): Does a contractionary policy shock significantly depress Nasdaq-100 valuations?

Details

Supervisors

Iania, Leonardo

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion, à finalité spécialisée

Abstract

enThis thesis investigates how U.S. monetary policy shocks affect a technology–intensive equity index, the Nasdaq-100, over the period 1999–2024. Motivated by the idea that growth stocks behave like high–duration assets whose valuations are particularly sensitive to discount–rate movements, the analysis asks whether contractionary policy shocks systematically depress Nasdaq-100 returns, how strongly they propagate through the yield curve and macroeconomic activity, and whether these effects differ across crisis and non–crisis periods. The empirical framework is a monthly structural vector autoregression (SVAR) including industrial production, inflation, the 10-year–3-month term spread, the federal funds rate and Nasdaq-100 returns. Monetary policy shocks are identified using a recursive (Cholesky) structure that is standard in the monetary VAR literature. The model is used to compute impulse responses, forecast error variance decompositions and a historical decomposition of Nasdaq-100 returns, and the robustness of the results is assessed through alternative lag lengths, identification orderings and subsample estimation. The main findings are that contractionary monetary shocks produce a small but persistent decline in Nasdaq-100 returns, a flattening of the yield curve and modest reductions in real activity and inflation. Policy shocks explain only a small fraction of the short–run variance of technology returns, but their directional influence becomes particularly visible during major easing and tightening episodes such as the Global Financial Crisis, the COVID–19 shock and the 2022–2023 hiking cycle. Overall, the evidence points to a non–negligible but moderate discount–rate channel from monetary policy to technology equities, operating alongside dominant firm– and sector–specific forces.