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Inflation Announcements, Federal Reserve Bias And Stock
Returns

35 Pages Posted: 27 Jan 2004  

Miguel Coelho

Technical University of Lisbon - Instituto Superior de Economia e Gestao; CMVM - Comissao do Mercado de Valores Mobiliarios

João Duque

Technical University of Lisbon (UTL) - School of Economics and Management

Abstract

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.

Keywords: Stock Prices, Inflation Announcement, Federal Reserve Bias

JEL Classification: E44, G14

Suggested Citation

Coelho, Miguel and Duque, João, Inflation Announcements, Federal Reserve Bias And Stock Returns. Available at SSRN: https://ssrn.com/abstract=492782 or http://dx.doi.org/10.2139/ssrn.492782

Miguel Coelho

Technical University of Lisbon - Instituto Superior de Economia e Gestao ( email )

Rua Miguel Lupi, 20
Lisbon, 1249-078
Portugal
+351 213925800 (Phone)

CMVM - Comissao do Mercado de Valores Mobiliarios

Avenida Fontes Pereira de Melo, 21
Lisbon, 1056-801
Portugal

João Luís Correia Duque

Technical University of Lisbon (UTL) - School of Economics and Management ( email )

Rua Miguel Lupi, 20
Lisbon, 1249-078
Portugal

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