When Bankers Go to Hail
43 Pages Posted: 15 Mar 2018 Last revised: 7 Aug 2018
Date Written: July 27, 2018
We introduce taxi cab ridership between the Federal Reserve Bank of New York and the largest, most systemically important financial institutions headquartered in New York as a novel proxy for Fed activity. High Fed-bank cab ridership in the recent past is negatively related to future stock market returns: a market timing strategy that invests in the market portfolio (risk-free asset) when lagged ridership is low (high) earns a Sharpe ratio that is over 50% larger than the market portfolio. This strategy’s superior performance is especially pronounced during FOMC meetings. Overall, our findings are most consistent with the Fed increasing activity when it possesses negative information about market performance that is ultimately impounded in prices.
Keywords: The Federal Reserve, FOMC, Monetary policy; NY Fed, Taxi ridership
JEL Classification: E50, E52, G20
Suggested Citation: Suggested Citation