Abstract
We estimate the reaction of the hotel and restaurant industries to the monetary policy actions of the Federal Reserve in the US. We find that the portfolios of hotel industry stocks react strongly to the unexpected changes in the Federal Funds Target Rate. Specifically, for a hypothetical surprise 25-basis-point rate cut, the value-weighted hotel industry stock portfolio registers a one-day gain of 245 basis points (or 2.45 percent). This response is 78% stronger than that of the overall equity market in the US. On the other hand, the restaurant industry is not as responsive to the unexpected changes in the monetary policy. We observe asymmetric reaction in both industries, especially at times of policy reversals.
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