Let's Face It: Quantifying the Impact of Nonverbal Communication in FOMC Press Conferences
68 Pages Posted: 18 Feb 2021 Last revised: 18 Mar 2022
Date Written: March 18, 2022
We apply facial recognition analysis to FOMC press conference videos and quantify one of the most important aspects of nonverbal communication - facial expressions. Using minute-level data, we align our nonverbal communication measure with a set of financial assets to estimate the impact of the Fed Chairs' facial expressions on investor expectations. We find that investors adversely react to negative expressions revealed during the press conference, even when controlling for the verbal component of the press conference and additional explanatory variables. This work sets forth a new way of capturing soft information embedded in central bank communication.
Keywords: Central Bank Communication, Facial Recognition, Video, Market Expectations
JEL Classification: E52,E58,F33,G12
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