News Vs Sentiments: Impact of Monetary Policy Announcement on Developed and Developing Countries’ Market Performance

This paper investigates the impact of monetary policy announcements on the performance of the stock market in twenty countries (10 Developed and 10 developing). Exchange rate changes and changes in bond yield were taken as control. Daily basis Panel data was used with daily frequency for five (5) years (2014 – 2018). An impact of these selected independent variables on the stock market index is estimated using the regression model and Panel Least Square model. Monetary policy data has been run in three different lags i.e. lag (0), lag (-1, -2, -3, -4), and lag (1, 2, 3, 4) in order to check the availability of monetary policy impact in pre and post announcement dates also, while the other variables run on a single lag. It is observed that the stock market of developed countries has a significant relation with monetary policy announcements, however, these announcements showed an insignificance relation with the stock market index in the case of developing countries. Moreover, exchange rates seem to have a significant effect on markets of both developing and developed countries, whereas bond yield seems to have a significant effect on the stock market of Developing countries only.


Introduction: 1.1 Background of the Study
Stock market prices go up and down every minute due to supply and demand fluctuations. If more and more people want to buy particular stocks, the market price will rise. Conversely, if more and more people want to sell stocks, the price will fall. This relationship between supply and demand is linked to news that is released at a particular moment. Negative news will usually cause people to sell stocks. Unexpected events, along with poor earnings reports, corporate governance, economic and political uncertainty, will translate into sales pressure and stock price decline. Positive news will usually cause people to buy stocks. Good earnings reports, increased corporate governance, new products and acquisitions, as well as positive overall economic, and political indicators, translate into buying pressure and an increase in stock price. The impact of new information on a stock depends on how unexpected the news is. This is because the market is always building future expectations into prices.
The market estimation of firms and the stock market can be altogether influenced by different factors out of which Monetary Policy announcements are a significant factor that is needed to consider when a speculator or a layman needs to put resources into the Stock Market. Stock prices are among the most intently checked resource prices in the economy and are regularly viewed as being highly sensitive to economic conditions. As the Monetary policy deals with interest rates, open market operations which are tools available to central banks to increase/decrease the money supply in the economy and therefore increasing/decreasing expenditure in the economy. The loose monetary policy period is categorized by an uptrend/boom in stock markets and tight monetary policy is categorized by a downtrend/recession in stock markets in general. The exchange rate is the value of the American dollar versus other currencies. The value of the dollar is both caused and reflected by interest rates, and interest rates have much to do with stock prices. Therefore, exchange rates affect stock prices and can be used to make predictions about the market. Bonds affect the stock market because they both compete for investors' dollars. Bonds are safer than stocks, but they offer a lower return. As a result, when stocks go up in value, bonds go down. When the economy slows, consumers buy less, corporate profits fall, and stock prices decline.
Electronic copy available at: https://ssrn.com/abstract=3681241 One of the main challenge an investor can face while investing in the stock market is the lack of knowledge about how the factors affect at that time because not all negative news regarding a particular country or company insist to sell shares and not all positive news acts a profitable for a long time. However, if the investor even only identifies the effects or frequency of the effects of major factors that affecting the stock market then he can play safe and take necessary steps for increasing their investment capital.
Identifying the link between monetary policy and financial resource costs is highly critical to pick up distant better insight in the transmission mechanism of monetary policy since changes in asset prices play a key role in several channels (Christos Ioannidis and Alexandros Kontonikas, 2006).

Problem Statement
Sometimes investor does not recognize the right time to enter or exit in the market which causes them affected by great loss, the investor kept themselves aware of the upcoming events related to the stock market. The investor would invest by taking a long position which means that they hold shares for a very long time only when they feel that upcoming news or upcoming event which is related to the stock market enhance the market otherwise they sell back the shares at a very short time. In recent years, sophisticated institutional traders in the financial markets have increasingly used new sources of information, such as "emotion" signals derived from news articles. Such analytics analysis is made using a computer algorithm and can tell traders within milliseconds whether the article is positive or negative and contains relevant information about the value of a firm. In parallel, increased computerized trade has accelerated the process of accessing such information, and the speed with which it is included in stock prices has increased. Access to such low-latency 'meta-information' -'news stories' -can provide a competitive advantage to their customers, who are primarily high frequency and algorithmic traders such as hedge funds.
However, when false algorithms start trading automatically based on incorrect information, false latency indicators can lead to unexpected results. For example, in April 2013 an incorrect twitter feed about a White House explosion caused a mini flash crash in US markets. Some quickly blamed algorithmic trading for the reaction, while others argued that human traders were mainly responsible. In any case, news reading algorithms may be more likely to misinterpret news than human traders. Thus, understanding the magnitude of the price effects associated with such Meta information is critical for policymakers concerned about financial market stability.
Electronic copy available at: https://ssrn.com/abstract=3681241 In either case, an important question is whether quick-triggered trading initiated by such lowlatency information has an impact on the market that is distinct from the underlying informational content of the news. That is, are there potentially distortionary price effects induced by high-frequency trading based on news analytics? It seems that only the existence of such distortions should justify regulatory intervention.
The important issue is to identify the factors that determine the risks involved in the purchase of a specific asset. The general problem addressed in this research is the factors that influence investors' decision making in the equity market and how equilibrium is established in this market. Therefore, the specific problem under study in this research was the impact of the three main variables or factors i.e. monetary policy, exchange rate, and bond yield while controlling for macro and firm specific-factors, on the equity market. This problem is important to address because the impact of these variables on the economy and economic resource allocation via the equity market seems significant and investors must be aware of the impact of each variable otherwise it will cause a major crash in his/ her investment portfolio.

3 Gap Analysis
Most studies focused on the real effects of monetary policy on the US stock market. In contrast, (Bohl et al., 2007) analyze the impact of ECB policy on national stock markets in four major European countries. (Martin T. Bohl Pierre L. Siklos David Sondermann, 2008) also found a negative and significant relationship between unexpected ECB decisions and European stock market performance. Further, ECB's monetary policy decisions are well expected from the market, which means that the central bank successfully negotiates its monetary policy. (Syed Mujahid Hussain, 2011) found that the monetary policy decisions generally exert immediate and significant influence on stock index returns and volatilities in both European and US markets.
The findings also show that press conferences held by the European Central Bank (ECB) that follow monetary policy decisions on the same day have a clear impact on European index return volatilities. This implies that they convey additional important information to market participants. For a developing country perspective, (Qayyum, Abdul, and Anwar, Saba, 2011) addressed the linkages between the monetary policy and the stock market in Pakistan. The results indicate that any change in the monetary policy stance has a significant impact on the volatility of the stock market.
Electronic copy available at: https://ssrn.com/abstract=3681241 As discussed above, most of the studies investigated a broader affect change monetary policy variables, very few focused on how fast the impact of monetary policy announcement effect the market based on the daily data. The studies are done to investigate this was either countryspecific studies or focused on the EU region. No such study was done on global bases that consist of both developing and developed countries. Hence, they do not provide a comparative analysis for both developed and developing countries with respect to the impact of announcements on the stock market performance. This quantitative study addresses that gap, focusing on the comparative study on the effect of the independent variables Monetary Policy announcement, changes in exchange rates and changes in bond yields on the dependent variable, the stock market return of developed and developing markets. Moreover, we also included exchange rate and bond yields in our analysis, as they too have a profound influence on stock prices. (Suriani et. al., 2015;Patoda & Jain, 2012) as we have not found any study in which analysis is based on the impact of all three components on the stocks market at the same time or multiple countries.

Research Objectives
This paper tries to give detailed empirical evidence on the impact of monetary policy announcements on the stock market Index of 20 nations which are further divided into two categories; Developed and Developing nations. For this, the MP announcement was taken as an independent variable along with changes of exchange rates and bond yields fluctuations serving control purposes. The main aim is to analyze how the development status of the countries plays a role in defining their investment markets in relation to news sentiments regarding the important factors that are a link with their investment markets. The dependent variable was the stock market index. Daily Panel observations of 20 countries for 5 years covering 2014 to 2018 were used for the analysis. The Analysis was done using multiple regression models appropriate for panel data (time series of cross-section) analysis. The developed countries took in this research includes; Switzerland, Japan, South Korea, Canada, Iceland, Spain, Australia, Norway, New Zealand, Singapore whereas the developing countries includes; Pakistan, India, China, Malaysia, Indonesia, Mauritius, South Africa, Philippines, Russia, Czech Republic.

Significance
The purpose of this study is to provide a detailed guideline for the investors as well as brokers/ brokerage firms about the effect of monetary policy along with other factors like the exchange rate and the bond yield on the stock market's performance. As these factors considered to be the most important predictors for stock market performance that's why if the investors understand the linkage between these factors with stock market index then they put their money in the market effectively and must aware that what is the effective time to enter or exit into the market.
The study intended to help individuals and institutional investors make more informed investment decisions and to assist monetary policy authorities in evaluating the impact of monetary policy on the stock market and the same for exchange rates and bond yields and thus taking preemptive actions to prevent stock market crashes.

Outline of the Study
The rest of the paper is organized as follows. The next section (2) discusses the literature review.
Section (3) presents the theoretical framework. Section (4) explains the research methodology. Section (5) presents details of descriptive statistics. Section (6) shows the trend analysis. Section (7) lags analysis of monetary policies. Section (8) explains the correlational analysis. Section (9) defines regression analysis. Section (10) provides results and interpretations. Section (11) explains the discussion. Section (12) define conclusion. Section (13) provides a recommendation. Section (14) shows references and in the last section (15) presents the Appendix.

Literature Review: -
There is a substantial volume of interest in understanding the connections between the stock market index and the variables like monetary policy, exchange rate, and bond yield. and bear market periods in ASEAN5 countries (Malaysia, Indonesia, Singapore, the Philippines and, Thailand) using the well-tested pooled mean group (PMG) technique. Estimating the models using monthly data from 1991:1 to 2011:12, the results show that a contractionary monetary policy (interest rate increases) has a stronger long-run effect on stock market volatility in bear markets than bulls consistent with the prediction of finance constraints models. (Hajilee, M. & Al Nasser, O. M., 2014). This article examines the impact of exchange rate uncertainty on the growth of the stock market as one of the most important indicators of financial market development. To do this, they developed a long-term and short-term model Asian countries, namely India, Sri Lanka, Bangladesh, and Pakistan. Economical models such as Johnson's integration test, long-term Granger coefficient test, and vector error correction model (VECM) are applied for short-term analysis. Results showed that there is no long-term relationship except India. Another Study, (Soenen and Henniger, 1988) found a significantly negative relationship between the value of the US dollar and stock prices by using monthly data on stock prices and effective exchange rates for the period 1980-1986. An association was examined by (Bhattacharya and Mukherjee, 2005) between the stock prices and financial sector of currency exchange in India and found no significant integration. Nonlinear Least Square method used by (Ong and Izan, 1999) to find the relationship in between stock prices and exchange rates. They found a very weak association between the US stock market and exchange rates. (Jorion, 1990) determines significant differences across industries by considering the impact of the exchange rate on US multinational firms. The developed countries have Electronic copy available at: https://ssrn.com/abstract=3681241 experienced less exposure to exchange rate movements as compared to developing or emerging countries. (Kyung-Chun Mun, 2007) examines that higher foreign exchange rate variability mostly increases local stock market volatility but decreases volatility for the US stock market.

Exchange Rates
The extent to which stock market volatility is influenced by foreign exchange variability is greater for local markets than for the US market because exchange rate changes are more strongly correlated with local equity market returns than the US market returns.

Bond Yield
(John Y. Campbell and Glen B. Taksler, 2003) using panel data for the late 1990s show that idiosyncratic firm-level volatility can explain as much cross-sectional variation in yields as can credit ratings. This article explores the impact of equity volatility on corporate bond yields.
(William F. Maxwell, 1998) examines the strengths and causes of January's impact on the corporate bond market. First, individual investors show seasonal demand for non-investment grade bonds, but they do not show any such seasonal demand for investment-grade bonds. The effect of January is found to be at least two phenomena. The results support the relationship between this disorder and the small strong impact.

Efficient Market Theories
The theoretical literature on the feasibility of using attractive interest policies as asset bubbles, especially in the stock markets, is unclear. Much of this literature focuses on stochastic asset price bubbles. While the efficient market view claims that stock prices quickly and rationally reflect all public information (so that stock prices follow a stochastic process close to a random walk), the overreaction hypothesis admits to temporary disparities between prices and fundamentals. Prices misbehave because many "noise traders" violate Bayes' Theorem and overreact to new information. Rational "information traders" can do little to counterbalance the behavior of noise traders and they may not want to, anyway (De Long et al. 1989, 1990. As a result, prices overshoot. Eventually, however, they get corrected as actual future events predictably turn out to be either less rosy or more pleasant than originally thought. This price behavior explains the profitability of contrarian strategies: Contrary to market efficiency, prior stock market "Losers" are a much better investment than prior "winners" (De Bondt and Thaler, 1985). In the debate about whether the data may still be consistent with market rationality.
Because risk premiums predictably vary through time (Fama and French, 1988) one approach is to study the behavior of so-called smart money. The arguments for market rationality lose force Electronic copy available at: https://ssrn.com/abstract=3681241 if those traders whom we normally think as sophisticated display the same biases as do naïve subjects in controlled experiments.

Research Methodology
The perspective of this study was to find out the influence of MP announcements, changes in ER and fluctuations in BY on the stock market index of 20 countries. Quantitative techniques and Eviews are used in this research. To analyze the data Panel Least Square (PLS) used in this study.

Developed countries
Developed countries have technology advancement and the economy is highly developed and has higher per capita wage levels. To be considered a developed nation, a nation, for the most part, includes a per capita salary around or over $12,000. Moreover, most developed nations have a normal per capita salary of roughly $38,000. As of 2010, the list of developed countries included the United States, Canada, Japan, Republic of Korea, Australia, New Zealand, Scandinavia, Singapore, Taiwan, Israel, nations of Western Europe, and a few Middle Easterner states. In 2012, the combined populations of these nations accounted for around 1.3 billion individuals. The populations of developed nations are by and large more steady, and it is assessed that they will develop at an unfaltering rate of around 7% over the following 40 a long time.

Developing countries
The second economic category took in this research is developing countries. The most accepted definition of a developing country is one in which industrialization is low and low on the Human Development Index (HDI). A lower HDI score means that citizens of a particular country have a higher life expectancy, lower educational attainment, lower per capita income, and higher fertility rates than other countries. The stock market in Developing countries can be separated assist into decently developed or less developed nations. Modestly developed nations have an inexact per capita wage of between $1,000 and $12,000.

Data Collection
For this research, data was collected from secondary sources like central bank websites, the World Bank website and the website of investing.com for stock market indexes and others.

Variables Specification
The variables that were used in this paper are a stock market index which is acts as the dependent variable and monetary policy, exchange rate and bond yield act as independent variables.

Stock Market Index
The stock market index which acts as a dependent variable in this research paper is calculated by the selected share price (typically a weighted average). A market index is a hypothetical portfolio of investment holdings that represents a segment of the financial market. The calculation of the index value comes from the prices of the underlying holdings. Some indices have values based on market-cap weighting, revenue-weighting, float-weighting, and fundamental-weighting.
Weighting is a method of adjusting the individual impact of items in an index. The stock market index can be categorized in several ways. A 'world' or 'global' stock market index -such as MSCI World or the S&P Global 100 -includes stocks indexes from different and multiple regions.
Areas can be defined geographically (such as Europe, Asia) or industrial or income levels (e.g. developed markets, frontier markets). A 'national' index represents the stock market performance of a given country and, reflects investor's sentiment on the state of its economy. The most regular quotes in the market are national indices consisting of stocks of major companies that are listed on one of the country's largest stock exchanges, such as the American S&P 500, Japanese The basic theory is that when the domestic stock market rises, it gives investors confidence that the country's economy is also rising, leading to increased interest from foreign investors and demand for the domestic currency. Conversely, if the stock market underperforms, confidence falters and foreign investors take their funds back to their currencies.

Monetary Policy
Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency. Monetary policy endeavors to attain a set of goals that are communicated in terms of macroeconomic factors such as inflation, real output, and business. However, monetary policy actions such as changes within the central bank discount rate have at best a backhanded effect on these factors and significant slacks are included within the policy transmission component. Broader budgetary markets though, for illustration the stock market, government and corporate bond markets, contract markets, foreign trade markets, are speedy to incorporate new information. The Monetary strategy should then assume a significant job in deciding value returns either by adjusting the markdown rate or by impacting market members' desires for future financial movement. Data regarding monetary policy announcement dates were taken from central bank websites of each country.

Exchange Rates
In finance, an exchange rate is a rate at which one currency will be exchanged for another. It is also regarded as the value of one country's currency to another currency. In the retail currency exchange market, different buying and selling rates will be quoted by money dealers.
The increase in demand for local currency will force the interest rates to become higher which will ultimately attract foreign investors to invest and gain maximum benefit. The exchange rate of the local currency will appreciate that of foreign currency and shows a negative relationship as also suggested by the Portfolio Balance approach. Daily basis exchange rates with base-dollar of each country were taken from investing.com websites.

Bond Yields
Bond yield is the return an investor realizes on a bond. The bond yield can be defined in different ways. Setting the bond yield equal to its coupon rate is the simplest definition. More complex calculations of a bond's yield will account for the time value of money and compounding interest payments. Since bonds and stocks address guarantees on the proportional corporate assets, money related hypothesis suggests that, in a frictionless market, information that is imperative to their sensible worth should contemporaneously impact their benefits. Daily basis data of 10 years bond yield of each country was taken from investing.com websites.

Descriptive Statistics
In this section, detailed descriptive statistics of both developed and developing countries regarding the stock market index, monetary policy, exchange rate, and bond yield are analyzed.  Standard deviation of MP is slightly greater than its mean which means that the MP announcement average counts are somehow close to its mean. The standard deviation of the ER is greater than its mean value which means that most of the exchange rates are far from the average rate of ER whereas the standard deviation of BY is 0.016 which is less than the mean which means that most of the values are near to mean.
Model 3 is the descriptive data of developing countries in our sample, and by the help of this which is also reported in the Czech Republic in the month of Sept 2016. The standard deviation of the SMI is greater than its mean which means that most of the indexes are far from the values of the mean. The standard deviation of MP is slightly greater than its mean which means that the MP announcement average counts are somehow close to its mean. The standard deviation of the ER is greater than its mean value which means that most of the exchange rates are far from the average rate of ER whereas the standard deviation of BY is 0.02 which is less than the mean which means that most of the values are near to mean.    A test statistic is a standardized value that is calculated from sample data during a hypothesis test. A t-value of 0 indicates that the sample results exactly equal to the null hypothesis. As the difference between the sample data and the null hypothesis increases, the absolute value of the tvalue increases. As the table divided is into two categories; developed and developing countries.

Lag Analysis of Monetary Policy
For developed countries at lag -4, -2, -1, 3, the t-statistics value is near to 0 which means that the sample results of MP on these lags is exactly equal to the null hypothesis where the t-statistics on other lags i.e. -3, 0, 1, 2, 4 are far from 0 which means that the evidence is against the null hypothesis. Whereas the p-sig value of developed countries with respect to monetary policy at lag -3 and 1 are less than 0.05 which means that we reject the null hypothesis and assume that there is a significant relationship between MP and SMI at these lags while the sig value at all other lags are greater than 0.05 which means than we accept the null hypothesis and assume that there is an insignificance relationship between MP and SMI at these lags. Below are the graphs which further illustrate the trend of t-statistics and p-sig values of MP of developed countries at different lags: For developing countries, at lag -4, -1, 0, 3 the t statistics are near to 0 which means that the sample results of MP on these lags is exactly equal to the null hypothesis where the t-statistics on      In tables 6 and 8 focusing on overall and developing countries, there is a week and a negative correlation between monetary policy and stock market index. The correlation of the exchange rate with the stock market index and monetary policy is negatively week. There is a positive

Correlational Analysis
week correlation between the bond yield and the stock market index. There is also a positive week correlation between the bond yield and the exchange rate. However, for developed countries (Table 7), there was a strong and positive correlation between monetary policy and stock market index whereas bond yield and stock market index have a negative and strong correlation.

Regression Analysis
Further, multiple regression analysis tests are performed in this research. The method used for this test is Panel Least Square method while taking the stock market index (SMI) as dependent variable Y and monetary policy (MP), exchange rates (ER) and bond yield (BY) as an independent variable X. the regression model used for the study is as follows: = ∁ + ( ) + ( ) + ( ) +  12608   2290   2289  12373  2110  2110  Periods included:  1384  337  335  1321  274  274   The table presents the regressions finding for both  4.15, and 3.93 for models 1, 2, and 3. As the sig value of ER is less than 0.05 so therefore we can say that there is a significant relationship between the ER and the SMI of developed countries. It has been seen normally that when money is cheap, the economy will expand because more businesses will build capital stock, expand their production and continue to borrow money. For the short term, cheap money suggests the stock market will show price rises across the board.

Results and Interpretations: -
Cheap money means that the exchange rate is starts rising. So as per our analysis, there is also an increasing trend and concluded that when 1 unit change in ER, the SMI of developed countries 10 years, this relationship will be clearly visible. As our analysis also explains that when the BY increases in developing countries the SMI starts decreasing because the reason behind this is that the bond yields, in a way, represent the opportunity cost of investing in equities. For example, if the 10-year bond is yielding 7 % per annum then the equity markets will be attractive only if it can earn well above 7 %. In fact, equity being risky there will have to be a risk premium, first of all, to be even comparable. Let us assume that the risk premium on equities is 5 %. Therefore, that 12 % will act as the opportunity cost for equity. Below 12 %, it does not make sense for the investor to take the risk of investing in equities as even the additional risk is not being compensated. The question of wealth creation only begins after that. As bond yields go up the opportunity cost of investing in equities goes up and therefore equities become less attractive.
That is the main reason that explains the negative relationship between bond yields and equity markets, as in our results the coefficient of bond yield in all models shows a negative value of -2933.56, -8637.16, and -5900.1 respectively but the bond yield at the same time have a significant relationship with SMI of developing countries because the sig value is less than 0.05 at all lags of monetary policy. So, therefore we can say that there is a significant impact of bond yield on the stock market index of developing countries. However, ER has a negative relationship with the SMI for developing countries at all lags of monetary policy because the coefficients of ER are -0.79, -0.72, and -0.71. As the sig value of ER is less than 0.05 so therefore we can say that there is a significant relationship between the ER and SMI of developing countries.
As discussed above, the ER behaved positively for a developed countries and negatively for developing. Furthermore, it remained significant throughout all models, seems to depict a very strong effect on stock returns The value of R squared in all the models was about 98% which means that 98% of the effect is due to the independent factors and the other 2% variance is may be due to other factors.
Model 2, and 5 show a positive relation of MP at Lag (-1) and at (-4) and a negative relation with SMI at lag (-2) and (-3) which means that Second (2 nd ) and Third (3 rd ) day before the announcement of monetary policy the SMI will decrease. Mentioned above the overall conditions from model 2 and model 5 but only at lag (-3) of model 2 has a significant relationship with SMI which means that 3 days before the announcement of monetary policy, the stock market of developed is suffered. It is observing that when the monetary policy announced there are some changes occurs in the economic system and due to expected humor regarding the results of monetary policy, the investors' confidence shake and they take safety steps or sometimes put their money back just to re-invest\when the economy is stable and be on track again. However, it affects the stock market index for a short time after some moments the stock market will start enhancing when the government take the necessary step which is predefined in respect to the current situations of the economy, as we have developed and developing countries both and due to the data runs on different lags therefore the significance of data owns much importance to analyses the real effect. In lag (-1, -2, -3, -4), the sig value of MP in Lag (-3) is less than 0.05 which means that we can conclude that there is a significant relationship between MP and SMI of developed countries before the 3 days of announcing it. Whereas the sig value of before one day, two days and fourth day that is (-1, -2, -4) are greater than 0.05 which means that there is no insignificance relationship in between monetary policy announcement and stock market index of developed countries at these (-1, -2, -4) lags. Model 2 contains the regression analysis of developed countries. As the sig value at lag (-3) in model 1 is less than 0.05 which means that there is a significant relationship between SMI and MP at lag (-3) of developed countries which can be further assumes that the SMI of developed countries seems decreasing trend (due to negative value of coefficients at lag (-3)) and index decreased by 1586.52 before the 3 day of announcement of policy, this is maybe because in the pre-announcement days of MP there is a humor floating in the market regarding the expected uncertainty due to fluctuations in the interest rate and discounts rate which is announced in MP. However, concerning developed countries as it can be seen that the SMI is decreased than it may be a cause of floating uncertainty regarding the fluctuations in interest rates because interest rates define most of the economic indicators. As the model 5 belongs to developing countries and due to their sig value is greater than 0.05 at all lags, so there is an insignificance relationship between MP and SMI at the lags mentioned in model 5 therefore we can say that there is no any impact of monetary policy announcements on the stock market index of developing countries. As our null hypothesis is" there is an insignificance relationship between monetary policy and stock market index". So here in model 2, the sig value at lag (-3) is less than 0.05 which force reject our null hypothesis which means that the SMI of developed countries shows the decreasing trend at 3 days before the announcement. Whereas the sig values at all the other lags in model 2 and model 5 are greater than 0.05 which force us to accept our null hypothesis which means that there an insignificant relationship hence there is no impact of MP announcement on the SMI at all these lags.
In Model 3, and 6, there is a negative relation of MP at Lag (1), Lag (2) with SMI which means that in these two days after the announcement of monetary policy the SMI will decrease.
However, for Lag (3) and Lag (4), developed countries' coefficient stayed negative as in previous cases of models 1 and 2, but developing countries have a positive impact. Model 3 contains the regression analysis of developed countries. As the sig value at lag (1) in model 3 is less than 0.05 which means that there is a significant relationship between SMI and MP at lag (1) of developed countries which can be further assumed that the SMI of developed countries seems to decrease (due to negative coefficient at lag (1) (3), and Lag (4) are greater than 0.1 which means that there is no significant relationship in between two, three and four days after the MP announcement and SMI of developed countries at these lags. As we mentioned already that the MP announced in the midday time at the time when the stock market starts turning off so the effect of monetary policy is logically being reflected on the next day of its announcement. Mostly new policies make some changes in the economic system however it took some moments to economic system to be back on track therefore generally the first day after the announcement of monetary policy the stock market reflects the decreasing trend as we analyze in our paper. As our null hypothesis is" there is an insignificant relationship between monetary policy and the stock market index". So here in model 3, only the sig value at lag (1) is less than 0.05 which force us to conclude that there is a significance relationship between SMI and MP at lag (1) which means that the stock market index of developed countries shows the decreasing trend at the day after the announcement of policy. Whereas in model 6, all sig values are greater than 0.05 which means that there is no impact of MP on the SMI of developing countries.

Discussion
Electronic copy available at: https://ssrn.com/abstract=3681241 Our analysis suggested that the stock market of developed countries performs well as compared to developing countries in the sample period of 5 years, the exchange rate of developing countries is increased significantly in the 5 years as compared to developed countries also 10 years bond yield of developing is better than developed countries. It has been seen that the monetary policy has significance relation monetary policy at lag -3 and 1 for developed countries; however, the monetary policy is not the significant predictor for the stock market index of developing countries, there is almost a week and negative correlation among all the variables observe by the correlation test.
In this manner, the study (Richard D.F Harris, 1997) found that the stock market effect may be weaker than they found. For the less developed sample, the stock market effect, as with the full sample, is at best very weak. For the developed countries, however, stock market activity does have some explanatory power. Our findings are in much more in detail, the regression found that the for developed countries monetary policy at lag (-3) and Lag (1) and exchange rate is a predictor to make significant impact on the performance of stock market index where bond yield does not make a sense to affect the stock market index. However, for developed countries, it can be seen that the result is against the null hypothesis for both exchange rates and 10 years bond yield rate which means that the exchange rate bond yield affects the stock market performance while the monetary policy does not make any impact on the stock market index.

Conclusion
Impact of monetary policy announcement on the stock market performance of developed and developing countries along with other variables like ER and BY, itself very interesting concern for the investors and stock related bodies. Previous researches provide different arguments on the impact on the stock market index by different factors. This paper fills the gap which is already and stock market Index, which can be further concluded that bond yield is not the predictor of the stock market index in developed countries. However, for developing countries, it has been concluded that monetary policy is not the predictor of the stock market index at all, while the exchange rate and bond yield has a significant relationship with the stock market index and has a negative impact of both variables on the stock market index.

Recommendation:
From the foregoing, this study recommends that the central bank of developed countries must ensure effective implementation of monetary policy to maintain favorable interest rates and exchange rates because these elements reflect the soundly effect on stock market performance in developed countries. The investors who belongs to developed countries and/ or wants to invest in the stock/ equity market of developed countries must keep their eyes on exchanges rates fluctuations and monetary policy announcements and must estimate the pre and post announcement effect of monetary policy if the interest rates go up or down or remains constant because both of these elements significantly predict the stock market. Same as for the investors of developing countries, they should also keep their eyes on these elements except monetary policy because the exchange rate and, bond yield have a significant impact on stock market performance. The investor in the stock no matter he/ she belongs to any category of country. He/ She must be clever and must be aware that when the change in these elements (monetary policy, exchange rates, and bond yields) affects their investment so they can take some important steps before they bare losses.