Stock Returns over the FOMC Cycle
By Anna Cieślak, Adair Morse, Annette Vissing-Jorgensen. Journal of Finance, 2019
249 citations recorded by the source corpus.
We document that since 1994, the equity premium is earned entirely in weeks 0, 2, 4, and 6 in Federal Open Market Committee (FOMC) cycle time, that is, even weeks starting from the last FOMC meeting. We causally tie this fact to the Fed by studying intermeeting target changes, Fed funds futures, and internal Board of Governors meetings. The Fed has affected the stock market via unexpectedly accommodating policy, leading to large reductions in the equity premium. Evidence suggests systematic informal communication of Fed officials with the media and financial sector as a channel through which news about monetary policy has reached the market.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/73a4d6be92bc387d5d32593b47172728c3d12bb3
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Citations in the corpus
- The Voice of Monetary Policy (2021, unknown): “Textual analyses of policy statements, minutes, and transcripts (e.g., Rozkrut et al., 2007; Hansen and McMahon, 2016; Hansen et al., 2018; Cieslak et al., 2019; Ehrmann and Talmi, 2020) suggest that central bankers’ words carry considerable weight,3 but little is known about the effects of their…”
- Non-monetary news in central bank communication (2018, background): “Empirical estimates of various specifications of the Taylor rule suggest that this condition plausibly holds in the US data (Clarida et al., 2000; Coibion and Gorodnichenko, 2011). The effect of real activity news on the yield curve is typically found to be hump-shaped, declining from the short-to-i”