Inflation Announcements, Federal Reserve Bias And Stock
Technical University of Lisbon - Instituto Superior de Economia e Gestao; CMVM - Comissao do Mercado de Valores Mobiliarios
Technical University of Lisbon (UTL) - School of Economics and Management
In this article, we found that the US stock prices react only to the unexpected component of U.S. inflation announcements, with such impact statistically significant only in a situation of economic recession. We also show that the impact of the unexpected component of inflation announcements is also dependent upon the 'signals' that the Federal Reserve sends to the market (the known Federal Reserve Bias). In fact, we found a negative correlation between the unexpected component of macroeconomic announcements and stock price returns, this correlation being statistically significant when the Federal Reserve discloses a Neutral Bias.
Number of Pages in PDF File: 35
Keywords: Stock Prices, Inflation Announcement, Federal Reserve Bias
JEL Classification: E44, G14