A study of stock price reactions to the decisions of the Federal Open Market Committee (FOMC) on changes in the federal funds rate.
Description:
This paper analyzes stock index reactions to interest rate actions by the FOMC. Unlike previous analyses this study utilizes macro-economic indicators and accounts for pre-decision market expectations. Results indicate significant reaction of the stock market to the actions of the FOMC regardless of interest rate actions matching pre-decision market expectations. Binary dummy variables representing the five days following an FOMC meeting indicate a significant reaction for days one; two and thr…
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Date:
May 2002
Creator:
Bushnell, Wesley