Abstract

https://ssrn.com/abstract=2698477
 


 



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


Oliver Boguth


Arizona State University (ASU) - Finance Department

Vincent Gregoire


University of Melbourne - Department of Finance

Charles Martineau


University of British Columbia, Sauder School of Business, Students

November 29, 2016

Melbourne Business School, 2016 Financial Institutions, Regulation & Corporate Governance (FIRCG) Conference
2016 Financial Markets and Corporate Governance

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 we show that they communicate little information. Evidence from equity and derivative markets demonstrates that investors lower their expectations of important announcements on days without press conferences, thereby constraining the actions of a committee that wants to avoid surprising markets. Using media coverage and Google searches, we show that investors shift attention away from announcements without press conferences. This inattention further hinders the Fed's attempts to coordinate market expectations and therefore prevents effective monetary policy. Correspondingly, we show that announcements not followed by press conferences convey significantly less price-relevant information.

Number of Pages in PDF File: 52

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

JEL Classification: G10, G14, G18, E58


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Date posted: December 3, 2015 ; Last revised: December 1, 2016

Suggested Citation

Boguth, Oliver and Gregoire, Vincent and Martineau, Charles, Shaping Expectations and Coordinating Attention: The Unintended Consequences of FOMC Press Conferences (November 29, 2016). 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

Contact Information

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 British Columbia, Sauder School of Business, Students ( email )
Vancouver
Canada
HOME PAGE: http://www.charlesmartineau.com
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