EconPapers    
Economics at your fingertips  
 

Relief Rallies after FOMC Announcements as a Resolution of Uncertainty

Chen Gu, Alexander Kurov () and Marketa Halova Wolfe

Journal of Empirical Finance, 2018, vol. 49, issue C, 1-18

Abstract: We find substantial positive average stock returns after FOMC announcements accompanied by the release of the Summary of Economic Projections (SEP) and press conference by the Fed Chair. Both SEPs and press conferences contain new information that moves financial markets. We show that several measures of uncertainty are significantly higher on days of FOMC announcements accompanied by SEP and press conference than on announcement days without SEP and press conference. Controlling for changes in uncertainty measured by VIX changes, the positive unconditional mean returns after the FOMC announcements with SEP and press conference disappear. We also find that stocks correlated with market uncertainty shocks have higher returns on days of FOMC meetings with SEP and press conference. These results suggest that the positive post-announcement stock market returns are related to resolution of uncertainty.

Keywords: Summary of economic projections; Monetary policy; FOMC meetings; Communication; Stock returns; Uncertainty (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 G14 G18 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927539818300604
Full text for ScienceDirect subscribers only

Related works:
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:eee:empfin:v:49:y:2018:i:c:p:1-18

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-03-31
Handle: RePEc:eee:empfin:v:49:y:2018:i:c:p:1-18