Helping Wall Street Understand Fed Speak: Monetary Policy Communication and Corporate Conference Calls

56 Pages Posted: 16 Apr 2021 Last revised: 7 May 2022

See all articles by Gustavo Cortes

Gustavo Cortes

Warrington College of Business, University of Florida

Mani Sethuraman

Cornell University

Felipe Bastos G. Silva

University of Missouri, Columbia

Date Written: May 1, 2022

Abstract

We explore the role played by earnings conference calls in helping capital markets process monetary policy communications. Using short-time windows centered on FOMC communication days and a novel dataset comprising dialogues between managers and analysts during corporate conference calls, we uncover a tone transmission channel of monetary policy wherein the linguistic tone of Fed communication drives the linguistic tone of macro-related dialogues in conference calls. The tone of macro-related dialogues contemporaneously affects stock markets, and the semantics of such dialogues consistently conveys monetary policy content. Additional analysis suggests that the effect of monetary policy tone on corporate conference calls is stronger in more recent years. Our results shed light on how earnings conference calls serve as an important venue that helps economic agents interpret “Fed Speak.”

Keywords: Monetary policy; Monetary policy communication; Federal Reserve; FOMC; Earnings conference calls; Market Microstructure.

JEL Classification: E52; E58; D83

Suggested Citation

Cortes, Gustavo and Sethuraman, Mani and Silva, Felipe Bastos G., Helping Wall Street Understand Fed Speak: Monetary Policy Communication and Corporate Conference Calls (May 1, 2022). Available at SSRN: https://ssrn.com/abstract=3798794 or http://dx.doi.org/10.2139/ssrn.3798794

Gustavo Cortes

Warrington College of Business, University of Florida ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/directory/person/9136/

Mani Sethuraman

Cornell University ( email )

Ithaca, NY 14853
United States

Felipe Bastos G. Silva (Contact Author)

University of Missouri, Columbia ( email )

331 Cornell Hall
Columbia, MO 65211
United States
5738829905 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
992
Abstract Views
3,313
rank
32,107
PlumX Metrics