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Journal of Finance Vol. 70 No. 1 2015

The Pre‐FOMC Announcement Drift

David O. Lucca1; Emanuel Moench2,3

1 Federal Reserve · 2 Both authors are affiliated with the Federal Reserve Bank of New York. We thank our discussants Annette Vissing-Jorgensen, Ken Kuttner, Pavel Savor, Jonathan Brogaard, Marcel Priebsch, and Chris Parsons as well as Tobias Adrian, Yakov Amihud, Nina Boyarchenko, John Cochrane, Richard Crump, Itamar Dr · 3 Both authors are affiliated with the Federal Reserve Bank of New York. We thank our discussants Annette Vissing-Jorgensen, Ken Kuttner, Pavel Savor, Jonathan Brogaard, Marcel Priebsch, and Chris Parsons as well as Tobias Adrian, Yakov Amihud, Nina Boyarchenko, John Cochrane, Richard Crump, Itamar Dr

open access

Abstract

We document large average excess returns on U.S. equities in anticipation of monetary policy decisions made at scheduled meetings of the Federal Open Market Committee (FOMC) in the past few decades. These pre‐FOMC returns have increased over time and account for sizable fractions of total annual realized stock returns. While other major international equity indices experienced similar pre‐FOMC returns, we find no such effect in U.S. Treasury securities and money market futures. Other major U.S. macroeconomic news announcements also do not give rise to preannouncement excess equity returns. We discuss challenges in explaining these returns with standard asset pricing theory.

DOI
10.1111/jofi.12196
Volume
70
Issue
1
Pages
329-371
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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