Premium for Heightened Uncertainty: Explaining Pre-Announcement Market Returns

An earlier draft of this paper was circulated under the title “Premium for Heightened Uncertainty: Solving the FOMC Puzzle.” We are grateful to Brad Barber, Ricardo Caballero, Peter Carr, Zhanhui Chen, Ing-Haw Cheng, Darrell Duffie, Ken French, Valentin Haddard, Toomas Laarits, David Lucca, Ian Martin, Annette Vissing-Jorgensen, Clara Vega, Kumar Venkataraman, Jessica Wachter, as well as seminar participants at the 2019 NBER Asset Pricing Program Spring Meeting, the 2019 ABFER Annual Meeting, the 2019 China International Conference in Finance, the 2019 Eastern Conference on Financial Mathematics, the 2019 Summer Institute in Finance, the 2020 AFA annual meeting, Tsinghua University, Shanghai Jiao Tong University, Peking University, Chinese University of Hong Kong, Cheung Kong Graduate School of Business, Southern Methodist University, Dartmouth College, Federal Reserve Board, Peking University HSBC Business School, and Penn State University for comments. We thank Meiling Chen and Zhe Geng for research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

• May 7, 2019
• July 2, 2019
• March 19, 2020