Stock Returns of Federal Reserve Officials

40 Pages Posted: 9 Aug 2022 Last revised: 25 May 2023

See all articles by Cody Couture

Cody Couture

Hamilton College - Economics Department

Abhiprerna Smit

College of William and Mary - Department of Economics; University of California Irvine - Department of Economics

Date Written: August 3, 2022

Abstract

This paper examines the trading behavior of members of the Federal Reserve’s Federal
Open Market Committee (FOMC). First, we calculate the financial market returns of
FOMC members relative to the overall market and examine if there is any evidence
of abnormal returns. Second, we test whether FOMC members exhibit evidence of
market timing around monetary policy announcements. We do not find any evidence
that FOMC officials select securities that earn abnormal returns. However, our results
regarding market timing are mixed. Though we do not find any evidence of security
selection or portfolio rebalancing with respect to monetary policy decisions, we do find
that stock sales by FOMC officials are typically succeeded by negative returns in the
overall stock market.

Keywords: FOMC, Abnormal returns, Investment behavior of elected officials

JEL Classification: E58, G14, D72

Suggested Citation

Couture, Cody and Smit, Abhiprerna, Stock Returns of Federal Reserve Officials (August 3, 2022). Available at SSRN: https://ssrn.com/abstract=4180986 or http://dx.doi.org/10.2139/ssrn.4180986

Cody Couture (Contact Author)

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States

Abhiprerna Smit

College of William and Mary - Department of Economics ( email )

Williamsburg, VA 23187-8795
United States

University of California Irvine - Department of Economics ( email )

3151 Social Science Plaza A, University of Califor
Irvine, CA 92617
United States

HOME PAGE: http://https://abhiprernasmit.github.io/

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