Complexity of ECB communication and financial market trading

Bernd Hayo, Kai Henseler, Marc Steffen Rapp and Johannes Zahner

Journal of International Money and Finance, 2022, vol. 128, issue C

Abstract: We empirically examine how the complexity of ECB communications affects financial market trading based on high-frequency data from European stock index futures trading between 2009 and 2017. Analysing the linguistic complexity of the ECB’s introductory statements and differentiating between press conferences with and without announcements of unconventional monetary policy measures (UMPM), we find that more complex communication, i.e. high linguistic complexity and UMPM-announcement, is associated with a lower level of contemporaneous trading activity. Moreover, complex communication leads to a temporal shift in trading activity towards the subsequent Q&A session, which suggests that Q&A sessions facilitate market participants’ information processing.

Keywords: ECB; Central bank communication; Textual analysis; Linguistic complexity; Readability; Financial markets; European stock markets (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Working Paper: Complexity of ECB Communication and Financial Market Trading (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:128:y:2022:i:c:s0261560622001127

DOI: 10.1016/j.jimonfin.2022.102709

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