NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Market Set-Up in Advance of Federal Reserve Policy Decisions

Dick van Dijk, Robin L. Lumsdaine, Michel van der Wel

NBER Working Paper No. 19814
Issued in January 2014
NBER Program(s):   ME

This paper considers the uncertainty associated with upcoming Federal Open Market Committee (FOMC) announcements and the extent to which the market begins to set up for such announcements well before they actually occur. We demonstrate that markets set up well in advance of known announcement days; as a result, there is often less uncertainty in the period immediately preceding an FOMC announcement, despite greater volume of activity, as the market has already incorporated anticipated signals. We consider the relative importance of both macro announcements and central bank officials’ speeches and congressional testimony in shaping market expectations. We find substantial evidence of anticipatory effects; these results are particularly relevant as the Fed develops its communication strategy to achieve an orderly exit from its program of quantitative easing.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19814

Users who downloaded this paper also downloaded these:
Reinhart and Rogoff w19823 Recovery from Financial Crises: Evidence from 100 Episodes
Greenwald, Lettau, and Ludvigson w19818 Origins of Stock Market Fluctuations
Kelly, Pastor, and Veronesi w19812 The Price of Political Uncertainty: Theory and Evidence from the Option Market
Fernald and Jones w19830 The Future of U.S. Economic Growth
Woodford w19897 An Optimizing Neuroeconomic Model of Discrete Choice
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us