Negative Monetary Policy and Changes in Apple’s Stock Price: Evidence from ARIMA Model

Abstract

The Federal Reserve has raised interest rates repeatedly to lower inflation, which has had an enormous influence on the stock market. This paper analyzes the influence of the Federal Reserve's interest rate increase on Apple's stock price and gives investor advice. This study used the ARIMA model to analyze the daily, weekly, and monthly data from January 3, 2011 to June 30, 2023. It demonstrates that the impact of the Federal Reserve's interest rate increase on the performance of Apple's stock varies over time, switching between negative and favorable correlations. Rates and returns are inversely associated in the ultra- and medium-short terms. Rates and returns have a favorable correlation over the short run. This alternation shows the diverse expectations investors have for the stock market's future at various points in time. In contrast to other studies, this paper focuses on how the Fed rate hike affects the stock return of a U.S. consumer electronics company, whereas existing articles discuss the impact of the Fed rate hike on a particular industry. This paper suggests that investors should take appropriate risk management measures in the ultra-short term and be cautious about company stocks; in the short term, pay attention to the market's future expectations, and consider buying when the pace of interest rate hikes slows down or when the hikes are lower than expected; in the short to medium term, investors should consider diversifying their funds into different industries, different companies, and even different asset classes.