Monetary Policy Slope and the Stock Market

85 Pages Posted: 10 Nov 2016 Last revised: 20 Jan 2018

See all articles by Andreas Neuhierl

Andreas Neuhierl

University of Notre Dame - Department of Finance

Michael Weber

University of Chicago - Finance

Multiple version iconThere are 4 versions of this paper

Date Written: January 19, 2018


We construct a slope factor from changes in federal funds futures of different horizons. A positive slope signals faster monetary policy tightening and predicts negative excess returns at the weekly frequency. Investors can achieve increases in weekly Sharpe ratios of 20% conditioning on the slope factor. The tone of speeches by the FOMC chair correlates with the slope factor. Slope predicts changes in future interest rates and forecast revisions of professional forecasters, but macro news does not drive the predictability of slope for future excess returns. Our findings are consistent with a delayed market reactions due to investor inattention.

Keywords: Return Predictability, Policy Speeches, Expected Returns, Macro News

JEL Classification: E31, E43, E44, E52, E58, G12

Suggested Citation

Neuhierl, Andreas and Weber, Michael, Monetary Policy Slope and the Stock Market (January 19, 2018). Available at SSRN: or

Andreas Neuhierl

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Michael Weber (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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