Stock Returns Over the FOMC Cycle

63 Pages Posted: 8 Nov 2015 Last revised: 15 Jun 2016

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: June 12, 2016

Abstract

We document that since 1994 the equity premium in the US and worldwide is earned entirely in weeks 0, 2, 4 and 6 in FOMC cycle time, i.e. in even weeks starting from the last FOMC meeting. We tie the even-week pattern causally to the Fed. The even-week returns are driven primarily by the Fed reacting to poor stock returns with more accommodation than expected (a “Fed put”). The timing comes from Fed monetary-policy decision-making tending to happen in even weeks. Evidence suggests systematic informal communication of Fed officials with the media and financial sector is the information transmission channel.

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 (June 12, 2016). 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

Paper statistics

Downloads
1,093
Rank
14,878
Abstract Views
5,218