L’tN efficient market is one that quickly processes all relevant information. For example, if monetary policy affects stock returns, then an efficient stock market rapidly digests and incorporates all news about monetary policy. Consequently, past policy actions will have little value or explanatosy power in understanding current stock returns. Previous tests of stock market efficiency have examined the relationship between the liming of the growth of money and stock returns. Although several early studies found that stock returns lagged behind money growth — evidence of stock market inefficiency — thc results of recent studies have supported the efficient market hypothesis,1