Asset Allocation | Monetary Policy & Inflation | US
Trading During FOMC Meetings
- By Sam van de Schootbrugge
- 7 min read
Summary
• A new Journal of Financial Economics paper examines asset price behaviour between FOMC policy statements and the subsequent press conference.
• Price changes around the statement release are highly correlated with price changes during the press conference, yielding a profitable trading strategy.
• The first few questions in the press conference – when new information is discussed – are key. Also, price variations peak when the Fed discusses its long-term outlook.
Introduction
Many papers, and therefore various trading strategies, have tried to profit from patterns in how investors interpret Fed signals at FOMC meetings. However, new textual analysis methods are helping researchers understand why and when these patterns emerge.
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