Unconventional monetary policy and the behavior of shorts

Thomas McInish (), Christopher Neely and Jade Planchon ()

No 2017-031, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We investigate the behavior of shorts, considered sophisticated investors, before and after a set of Federal Reserve unconventional monetary policy announcements that spot bond markets did not fully anticipate. Short interest in agency securities systematically predicts bond price changes and other asset returns on the days of monetary announcements, particularly when growth or monetary news is released, indicating shorts correctly anticipated these surprises. Shorts also systematically rebalanced after announcements in the direction of the announcement surprise when the announcement released monetary or growth news, suggesting that shorts interpreted these announcements to imply further yield changes in the same direction.

Keywords: Quantitative Easing; Treasury bond short interest; Monetary Policy; Large-Scale Asset Purchases (LSAP); Agency securities; Treasury securities; Great Recession (search for similar items in EconPapers)
JEL-codes: E4 E44 E52 G1 G18 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2017-10-27, Revised 2021-09-30
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: Publisher DOI: https://doi.org/10.1111/jmcb.13045
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Money, Credit, and Banking

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2017/2017-031.pdf Full text (application/pdf)

Related works:
Journal Article: Unconventional Monetary Policy and the Behavior of Shorts (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2017-031

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2017.031

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().