63 Pages Posted: 8 Nov 2015 Last revised: 15 Jun 2016
Date Written: June 12, 2016
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: 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