The cross section of the monetary policy announcement premium

• 成果类型: Article
• 署名作者: Ai, Hengjie; Han, Leyla Jianyu; Pan, Xuhui Nick; Xu, Lai
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; University of Wisconsin System; University of Wisconsin Madison; Boston University; University of Oklahoma System; University of Oklahoma - Norman; Syracuse University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.07.002
• 发表日期: 2022
• 页码: 247-276
• 关键词: FOMC announcement; Implied variance; Cross section; Equity returns

摘要

Using the expected option-implied variance reduction to measure the sensitivity of stock returns to monetary policy announcement surprises, this paper shows monetary policy announcements require significant risk compensation in the cross section of equity returns. We develop a parsimonious equilibrium model in which FOMC announcements reveal the Federal Reserve's private information about its interest-rate target, which affects the private sector's expectation about the long-run growth-rate of the economy. Our model accounts for the dynamics of implied variances and the cross section of the monetary policy announcement premium realized around FOMC announcement days. (c) 2021 Elsevier B.V. All rights reserved.