Risk & Returns around Fomc Press Conferences: A Novel Perspective from Computer Vision

Alexis Marchal
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Alexis Marchal: EPFL; SFI

No 21-18, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: I propose a new tool to characterize the resolution of uncertainty around FOMC press conferences. It relies on the construction of a measure capturing the level of discussion complexity between the Fed Chair and reporters during the Q&A sessions. I show that complex discussions are associated with higher equity returns and a drop in realized volatility. The method creates an attention score by quantifying how much the Chair needs to rely on reading internal documents to be able to answer a question. This is accomplished by building a novel dataset of video images of the press conferences and leveraging recent deep learning algorithms from computer vision. This alternative data provides new information on nonverbal communication that cannot be extracted from the widely analyzed FOMC transcripts. This paper can be seen as a proof of concept that certain videos contain valuable information for the study of financial markets.

Keywords: FOMC; Machine learning; Computer vision; Alternative data; Asset pricing; Equity premium. (search for similar items in EconPapers)
JEL-codes: C45 C55 C80 E58 G12 G14 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2021-03
New Economics Papers: this item is included in nep-big, nep-cmp, nep-fmk, nep-ifn and nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2118

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