Abstract
This study investigates the perspective of equity investors and their reaction to the Federal Open Market Committee (FOMC) announcements, when they disagree on Federal Fund Target rates decisions. My evidence shows that investor expectations formulated prior to FOMC announcements have a significant impact on equity prices and that particularly when expectations are not aligned with the FOMC committee decision. My results reconcile past findings on the monetary policy surprise literature and more recent empirical findings on the effect of FOMC announcements on equity markets. A practical implication of my study is that monetary policy authorities should consider market expectations when formulating disclosure policy in order to improve alignment with financial market expectations and smooth out their economic consequences.
Lucia Murgia is Lecturer in Finance at Norwich Business School (NBS). Prior to joining NBS in September 2021, she was Senior Research Associate at the School of Economics (UEA) and she has completed a Ph.D. in Finance at NBS under the supervision of Dr Raphael Markellos and Dr Apostolos Kourtis. Before joining academia, she worked for three years in the financial industry as a portfolio and risk manager in Switzerland. She holds an MSc in Economics Major in Finance from the University of Lugano (Swiss Finance Institute), and BSc in Economics and Business Administration from Bocconi University in Milan (Italy). Her research interests are but are not limited to, financial market microstructure, macroeconomic announcements, and experimental financial and financial econometrics.
The seminar is held in English
Click here to join the meeting
More information: Lorenzo Dal Maso