Abstract

http://ssrn.com/abstract=1923197
 
 

References (39)



 
 

Citations (4)



 


 



The Pre-FOMC Announcement Drift


David O. Lucca


Federal Reserve Banks - Federal Reserve Bank of New York

Emanuel Moench


Federal Reserve Bank of New York

July 26, 2013

Journal of Finance, Forthcoming
FRB of New York Staff Report No. 512

Abstract:     
We document large average excess returns on U.S. equities in anticipation of monetary policy decisions made at scheduled meetings of the Federal Open Market Committee (FOMC) in the past few decades. These pre-FOMC returns have increased over time and account for sizable fractions of total annual realized stock returns. While other major international equity indices experienced similar pre-FOMC returns, we find no such eff ect in U.S. Treasury securities and money market futures. Other major U.S. macroeconomic news announcements also do not give rise to pre-announcement excess equity returns. Pre-FOMC returns are higher in periods when the slope of the Treasury yield curve is low, implied equity market volatility is high, and when past pre-FOMC returns have been high. We discuss challenges at explaining these returns with standard asset pricing theory.

Number of Pages in PDF File: 62

Keywords: FOMC announcements, equity premium, anomaly

JEL Classification: G10, G12, G15

working papers series





Download This Paper

Date posted: September 7, 2011 ; Last revised: August 1, 2013

Suggested Citation

Lucca, David O. and Moench, Emanuel, The Pre-FOMC Announcement Drift (July 26, 2013). Journal of Finance, Forthcoming; FRB of New York Staff Report No. 512 . Available at SSRN: http://ssrn.com/abstract=1923197 or http://dx.doi.org/10.2139/ssrn.1923197

Contact Information

David O. Lucca (Contact Author)
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
Emanuel Moench
Federal Reserve Bank of New York ( email )
33 Liberty St.
New York, NY 10045
United States
+1(212)7206625 (Phone)
+1(212)7201582 (Fax)
HOME PAGE: http://www.newyorkfed.org/research/economists/moench/index.html
Feedback to SSRN


Paper statistics
Abstract Views: 7,206
Downloads: 1,981
Download Rank: 3,594
References:  39
Citations:  4

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.359 seconds