Central Bank Actions and Words: The Intraday Effects of FOMC Policy Communications on Individual Equity Volatility and Returns
24 Pages Posted: 10 Oct 2017
Date Written: November 2017
We compare intraday impacts of the release of Federal Reserve decision announcements and of Federal Open Market Committee minutes between 2004 and 2015 on 1,997 equity return and volatility series. We find that returns are unresponsive to either news release, but conditional volatility increases for both, manifesting immediately after each information release, and persisting for 30 minutes post‐announcement. These effects are larger for decisions than for minutes. On stratifying firms by trading intensity, we find most “high trading intensity” firms respond to these announcements, while “low trading intensity” firms are less affected. Our results show that traders respond, albeit differently, to both sets of information releases.
Keywords: monetary policy, Federal Reserve announcements, intraday returns, market efficiency, central bank communication
JEL Classification: E52, G10, C14
Suggested Citation: Suggested Citation