Factor returns and FOMC announcements: The role of sentiment

George Dotsis and Carlo Rosa

The Quarterly Review of Economics and Finance, 2024, vol. 97, issue C

Abstract: We examine the dynamics of long-short factor returns on FOMC announcement days and the role of sentiment. We find that factor returns are negative on FOMC announcement days. Moreover, on these days returns are significantly lower following low sentiment periods. Hence, investor sentiment is a key driver of factor returns on FOMC days and this effect emanates mainly from the short portfolio leg of each factor.

Keywords: Factor investing; FOMC announcements; Sentiment (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:97:y:2024:i:c:s106297692400053x

DOI: 10.1016/j.qref.2024.03.014

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