Do monetary policy announcements affect stock prices in emerging market countries? The case of Thailand

•The effect of Thai monetary policy announcements on stock prices is examined.•The expected change in the policy rate has a positive effect on abnormal returns.•The unexpected change in the policy rate has no effect on abnormal returns.•The relation between the unexpected change in the policy rate and abnormal returns is significant during the financial crisis.

We examine the effect of monetary policy announcements in Thailand, which is one of emerging market countries in Asia, on stock prices at the firm level. We find that the expected change, rather than the unexpected change, in interest rates affects stock prices. The stock price response to the interest rate announcement is asymmetric. For instance, the relation between interest rate surprises and stock prices is conditional on the direction of the interest rate change. In general, macroeconomic conditions and firm characteristics cannot explain the stock price reaction to the announcement. In addition, stock prices of firms in different industries appear to react heterogeneously to the interest rate announcement.