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

65 Pages Posted: 14 Jun 2022 Last revised: 8 Jul 2024

See all articles by Oliver Boguth

Oliver Boguth

Arizona State University (ASU) - Finance Department

Adlai J. Fisher

University of British Columbia (UBC) - Sauder School of Business

Vincent Gregoire

HEC Montreal - Department of Finance

Charles Martineau

University of Toronto - Rotman School of Management and UTSC Management

Date Written: October 5, 2023

Abstract

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

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

Oliver Boguth

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

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

Adlai J. Fisher

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8331 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~fisher

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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