The Euro Crisis and the 24h Pre-ECB Announcement Return

58 Pages Posted: 22 Aug 2017 Last revised: 1 Dec 2017

Maxim Ulrich

Karlsruhe Institute of Technology

Elmar Jakobs

Karlsruhe Institute of Technology

Lukas May

Karlsruhe Institute of Technology

Julius Landwehr

Karlsruhe Institute of Technology

Date Written: November 15, 2017

Abstract

We document economically and statistically large 24h pre-ECB announcement returns in European equity. For selected industries, such as the European banking sector, the respective annual premium (2010–2015) was 12% (Sharpe ratio of 1.6); at a time when the annual return of the European banking sector was on average flat (lost decade). Concerns of an upcoming Euro-zone break-up explains 25% of the 24h pre-ECB announcement premium. After the 'whatever it takes' promise of ECB Chairman Mario Draghi, our measures for uncertainty of a Euro-zone break-up declined significantly, together with the 24h pre-ECB announcement premium.

Keywords: ECB announcements, equity premium, return anomaly, euro crisis, monetary policy put, announcement premium

JEL Classification: G01, G10, G12, G15

Suggested Citation

Ulrich, Maxim and Jakobs, Elmar and May, Lukas and Landwehr, Julius, The Euro Crisis and the 24h Pre-ECB Announcement Return (November 15, 2017). Available at SSRN: https://ssrn.com/abstract=3020899 or http://dx.doi.org/10.2139/ssrn.3020899

Maxim Ulrich (Contact Author)

Karlsruhe Institute of Technology ( email )

Bluecherstrasse 17
Karlsruhe, Baden Württemberg 76131
Germany
+4972160844270 (Phone)

HOME PAGE: http://risk.fbv.kit.edu/c-ram

Elmar Jakobs

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Lukas May

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Julius Landwehr

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

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