Stock Returns Over the FOMC Cycle

57 Pages Posted: 8 Nov 2015 Last revised: 8 Jun 2019

See all articles by Anna Cieslak

Anna Cieslak

Duke University, Fuqua School of Business

Adair Morse

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Annette Vissing-Jorgensen

National Bureau of Economic Research (NBER); University of California Berkeley, Haas School of Business

Date Written: February 12, 2018

Abstract

We document that since 1994, the equity premium is earned entirely in weeks zero, two, four and six in FOMC cycle time, that is, even weeks starting from the last FOMC meeting. We causally tie this fact to the Fed by studying intermeeting target changes, Fed funds futures, and internal Board of Governors meetings. The Fed has affected the stock market via unexpectedly accommodating policy, leading to large reductions in the equity premium. Evidence suggests systematic informal communication of Fed officials with the media and financial sector as a channel through which news about monetary policy has reached the market.

Keywords: Monetary Policy, Federal Reserve, FOMC, Communication, Stock Returns

JEL Classification: E52, G12

Suggested Citation

Cieslak, Anna and Morse, Adair and Vissing-Jorgensen, Annette, Stock Returns Over the FOMC Cycle (February 12, 2018). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2687614 or http://dx.doi.org/10.2139/ssrn.2687614

Anna Cieslak

Duke University, Fuqua School of Business ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States
919 660 7879 (Phone)

HOME PAGE: http://https://sites.google.com/site/ancieslak/

Adair Morse (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Annette Vissing-Jorgensen

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of California Berkeley, Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

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