Noisy FOMC Returns? Information, Price Pressure, and Post-Announcement Reversals

Extending methods from microstructure studies, we show that stock-market prices following FOMC announcements appear "noisy". Standard predictive regressions confirm significant reversal of event-window returns by announcement-cycle end. Consistent with theories of announcement information and price pressure, reversal predictors include VIX changes, abnormal volume, and ETF flows. We further document surging post-announcement trade volume, pinpoint intra-cycle return predictability, and show sustained effects of monetary policy surprises on post-event price dynamics. FOMC announcements inform markets but also trigger intense liquidity demands that impact prices, highlighting the importance of connecting public information to price pressure in future theories.

Keywords: JEL Classification: E50, G12, G14 price informativeness, price pressure, FOMC announcements, monetary policy surprises

JEL Classification: E50, G12, G14

Suggested Citation: Suggested Citation

Boguth, Oliver and Fisher, Adlai J. and Gregoire, Vincent and Martineau, Charles, Noisy FOMC Returns? Information, Price Pressure, and Post-Announcement Reversals (October 5, 2023). Available at SSRN: https://ssrn.com/abstract=4131740 or http://dx.doi.org/10.2139/ssrn.4131740