Whose Speeches Impact European Markets: ECBs’ or the National Central Banks’?
IIM Bangalore Research Paper No. 640
European Financial Management, 28, 1413– 1476. (2022).
82 Pages Posted: 22 Apr 2021 Last revised: 23 Aug 2023
Date Written: August 11, 2021
Abstract
We quantify the tone from the speeches of the ECB as well as that from the national central banks of six leading European nations, and analyze its role in explaining the returns of their respective stock market indices. Using innovations in financial text analysis introduced in Anand et al. (2021), we find evidence that except for France, all nations' stock indices are significantly associated with the tone of speeches delivered by either the national or the European Central Bank (or both). For France, the national stock index volatility is found to be associated with its national central bank speech tone.
Keywords: Central Bank Communication, Tone Analysis, Financial Text Analysis, Federal Reserve speeches
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