Shaping Expectations and Coordinating Attention: The Unintended Consequences of FOMC Press Conferences
55 Pages Posted: 3 Dec 2015 Last revised: 25 Jan 2018
Date Written: January 24, 2018
In an effort to increase transparency, the Chair of the Federal Reserve now holds a press conference following some, but not all, FOMC announcements. Evidence from financial markets shows that investors lower their expectations of important decisions on days without press conferences and that these announcements convey less price-relevant information. Using different proxies, we show that investors pay more attention to upcoming announcements with press conferences. This coordination of attention can reduce welfare in models of the social value of public information. Consistent with theories of investor attention, the market risk premium is larger on days with press conferences.
Keywords: Federal Reserve, Press Conferences, Transparency, Uncertainty, Attention, Risk Premium
JEL Classification: G10, G14, G18, E58
Suggested Citation: Suggested Citation