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Shaping Expectations and Coordinating Attention: The Unintended Consequences of FOMC Press Conferences

52 Pages Posted: 3 Dec 2015 Last revised: 7 Aug 2017

Oliver Boguth

Arizona State University (ASU) - Finance Department

Vincent Gregoire

University of Melbourne - Department of Finance

Charles Martineau

University of Toronto; University of British Columbia, Sauder School of Business, Students

Date Written: August 4, 2017

Abstract

In an effort to increase transparency, the Chair of the Federal Reserve now holds a press conference following some, but not all, Federal Open Market Committee announcements. Press conferences are scheduled independently of economic conditions and communicate little information. Evidence from financial markets demonstrates that investors lower their expectations of important decisions on days without press conferences and that these announcements convey less price-relevant information. Therefore, the addition of press conference probably decreased transparency. Moreover, we show that investors concentrate their attention on announcements with press conferences, which, in recent models of the social value of public information, can reduce welfare.

Keywords: Federal Reserve, Press Conferences, Transparency, Uncertainty, Attention

JEL Classification: G10, G14, G18, E58

Suggested Citation

Boguth, Oliver and Gregoire, Vincent and Martineau, Charles, Shaping Expectations and Coordinating Attention: The Unintended Consequences of FOMC Press Conferences (August 4, 2017). Melbourne Business School, 2016 Financial Institutions, Regulation & Corporate Governance (FIRCG) Conference; 2016 Financial Markets and Corporate Governance. Available at SSRN: https://ssrn.com/abstract=2698477 or http://dx.doi.org/10.2139/ssrn.2698477

Oliver Boguth

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Vincent Gregoire

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Charles Martineau (Contact Author)

University of Toronto ( email )

Rotman and UTSC
Toronto, Ontario M5S 3G8
Canada

HOME PAGE: http://charlesmartineau.com

University of British Columbia, Sauder School of Business, Students ( email )

Vancouver
Canada

HOME PAGE: http://www.charlesmartineau.com

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