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Skandia Award 2020 "Stock Returns and Federal Reserve Communications"

Welcome to the Skandia Award 2020 Talk with Annette Vissing-Jorgensen

In this talk, Professor Annette Vissing-Jorgensen will discuss the effects of the Federal Reserve on the stock market. A central theme is that information from the Federal Reserve arrives not only on formal announcement days but also between announcements in particular weeks over the “FOMC cycle.” A lot of information appears to reach markets via informal communications channels, as opposed to announcements or speeches.

The study of almost 30,000 entries in calendars of Federal Reserve governors (including the chair) reveals that policy-maker interactions – specifically calls/meetings with Federal Reserve Bank presidents – are most closely linked to stock returns. Media interactions on days with governor-president interactions emerge as a central avenue for informal Federal Reserve communication. The use of informal communication may be driven by policy-maker disagreeement, with each policy maker seeking to affect market expectations to gain an upper hand in policy negotiations. From an asset pricing perspective, since the times of governor-president interactions are not publicly known ahead of time, the effect of the Fed on the stock market appears to reflect unexpectedly positive policy news rather than a risk premium for Fed policy news.

Professor Vissing-Jorgensen will present her findings during a digital talk, followed by a Q&A moderated by Professor Magnus Dahlquist, The Swedish House of Finance at the Stockholm School of Economics.

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