The Pre-FOMC Announcement Drift

62 Pages Posted: 7 Sep 2011 Last revised: 1 Aug 2013

See all articles by David O. Lucca

David O. Lucca

Federal Reserve Banks - Federal Reserve Bank of New York

Emanuel Moench

Frankfurt School of Finance & Management; Centre for Economic Policy Research (CEPR)

Date Written: July 26, 2013


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.

Keywords: FOMC announcements, equity premium, anomaly

JEL Classification: G10, G12, G15

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: or

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

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics