Shaping Expectations and Coordinating Attention: The Unintended Consequences of FOMC Press Conferences

Oliver Boguth, Vincent Grégoire, Charles Martineau

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

In an effort to increase transparency, the chair of the Federal Reserve now holds a press conference (PC) following some, but not all, Federal Open Market Committee (FOMC) announcements. Evidence from financial markets shows that investors lower their expectations of important decisions on days without PCs and that these announcements convey less price-relevant information. Correspondingly, we show that investors pay more attention to upcoming announcements with PCs. This coordination of attention can reduce welfare in models of the social value of public information. Consistent with theories of investor attention, the market risk premium is larger on days with PCs.

Original languageEnglish (US)
Pages (from-to)2327-2353
Number of pages27
JournalJournal of Financial and Quantitative Analysis
Volume54
Issue number6
DOIs
StatePublished - Dec 1 2019

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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