The impact of central bank announcements on asset prices in real time: testing the efficiency of the Euribor futures market

Carlo Rosa and Giovanni Verga

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper examines the effect of European Central Bank communication on the price discovery process in the Euribor futures market using a new tick-by-tick dataset. First, we show that two pieces of news systematically hit financial markets on Governing Council meeting days: the ECB policy rate decision and the explanation of its monetary policy stance. Second, we find that the unexpected component of ECB explanations has a significant and sizeable impact on futures prices. This indicates that the ECB has already acquired some credibility: financial markets seem to believe that it does what it says it will do. Finally, our results suggest that the Euribor futures market is semi-strong form informational efficient.

Keywords: market efficiency; central bank communication; news shock; tickby-tick Euribor futures data; event-study analysis. (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2006-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://eprints.lse.ac.uk/19777/ Open access version. (application/pdf)

Related works:
Working Paper: The Impact of Central Bank Announcements on Asset Prices in Real Time: Testing the Efficiency of the Euribor Futures Market (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:19777

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