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

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

See all articles by Maxim Ulrich

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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