Price Pressure and Efficiency on FOMC Announcements

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See all articles by Oliver Boguth

Oliver Boguth

Arizona State University (ASU) - Finance Department

Vincent Gregoire

HEC Montreal - Department of Finance

Charles Martineau

University of Toronto - Rotman School of Management and UTSC Management

Date Written: March 11, 2019

Abstract

We examine the impact of the surge in trading activity following FOMC announcements on price discovery in the equity market, in particular in the highly liquid S&P 500 E-mini futures. In contrast to the hypothesis that all trading reflects learning about these public news announcements, we find that trading is associated with a decrease in price informativeness and order imbalances generate substantial price reversals reaching 60 basis points even at horizons of several hours. Our findings show that price pressure is prevalent in the most liquid assets following public news and have direct implications for measuring the impact of monetary policy news on equity prices.

Keywords: FOMC announcements, market efficiency, price discovery, price pressure

JEL Classification: E50, G12, G14

Suggested Citation

Boguth, Oliver and Gregoire, Vincent and Martineau, Charles, Price Pressure and Efficiency on FOMC Announcements (March 11, 2019). Available at SSRN: https://ssrn.com/abstract=

Oliver Boguth

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Vincent Gregoire

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Charles Martineau (Contact Author)

University of Toronto - Rotman School of Management and UTSC Management ( email )

105 St-George
Toronto, Ontario M5S3E6
Canada

HOME PAGE: http://charlesmartineau.com

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