The Impact of the Federal Funds Rate Hike on Walmart Stock Price: A Short-term and Dynamic Perspective

Abstract

The relationship between interest rates and stock prices has been a topic of debate among scholars. Most scholars agree that interest rates are negatively correlated with stock prices in general, but there are differences in specific countries, industries, and stocks themselves. This paper take Wal-Mart's stock price before the Federal's interest rate hike on 17 March 2022 as a time series, and use ARIMA models to predict the future price, and test whether the interest rate hike affects Wal-Mart's stock price in the ultrashort term and the short term by examining the difference between the model's predicted price and the actual price. The finding of this paper is that interest rate hikes have a slight negative impact on Wal-Mart's stock price in the ultra-short term and no significant impact in the short term. Since previous studies on interest rates and stock prices have dealt less with short-term price changes of individual stocks, this paper provides direction for related research in this area and serves to fill this gap. The advice given to investors in this paper is that when interest rates rise, investors can go short on ultra-short investment period within a week, but if the investment period is longer than nine days, they should be careful to observe that other factors, because interest rate hike do not have a significant impact.