Studies on the existence of the stock market channel of monetary policy in emerging markets are scant. We examine the impact of monetary policy on stock returns in Turkey's emerging economy during the post-1980 liberalization period. Evidence indicates that monetary policy affects returns with the strongest influence on the Financial and Services sectors. However, the impact is short lived, ranging between 9 and 24 months, depending upon the index used, suggesting that monetary policy is neutral. Overall, the results indicate that asset prices may provide an additional channel through which monetary policy affects short-run economic activity and hence business cycles. Given the increasing role of the stock market in emerging economies and the greater globalization of financial markets in general, central banks in these countries are well advised to pay close attention to the impact of stock market developments on economic activity, besides their traditional focus on the bond and foreign exchange markets.