Asymmetric effects of federal funds target rate changes on S&amp;P100 stock returns, volatilities and correlations

Chulia-Soler, Helena; Martens, Martin; Dijk, Dick van

doi:10.1016/j.jbankfin.2009.09.012

Cited by 153 publications

(120 citation statements)

References 38 publications

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“…The existing literature increasingly indicates that stock prices and realized volatility react to the arrival of new information within a very short time period (e.g. Chuliá et al, 2010;Scholtus et al, 2014). By taking advantage of the high frequency in our data, we are able to zoom in and observe how the release of the FOMC decisions affect the VIX and its futures contracts.…”

Section: Introductionmentioning

confidence: 93%

“…The general observation of many studies is that expansionary (contractionary) monetary policy decisions have positive (negative) impacts on stock markets (see, among others, Thorbecke, 1997;Rigobon and Sack, 2004;Bernanke and Kuttner, 2005;Basistha and Kurov, 2008;Kurov, 2010;and D'Amico and Farka, 2011), and that stock market volatility increases at the time of the announcement (see inter allii, Lobo, 2000Lobo, , 2002Bomfim, 2003;Farka, 2009;and Chuliá et al, 2010).…”

Section: Introductionmentioning

confidence: 99%

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When No News is Good News The Decrease in Investor Fear after the FOMC Announcement

2014

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This paper examines the impact of FOMC announcements on the intraday behavior of the VIX and VIX futures. We find that the VIX and the VIX futures start to decline immediately after the FOMC announcement, and this decline persists for about 45 minutes after the announcement. The VIX declines by about 3% on announcement days, whereas the nearest term VIX futures contract declines by about 1.40% around the announcement. We further note that the decline in the VIX and VIX futures is inversely related to the increase in realized volatility around the FOMC announcement. We show that on days with an FOMC announcement, a trading strategy, going short on the VIX futures at the start of the day and closing the position at the end of the same day, yields a return of about 10% p.a.

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Section: Introductionmentioning

confidence: 93%

Section: Introductionmentioning

confidence: 99%

When No News is Good News The Decrease in Investor Fear after the FOMC Announcement

2014

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“…Regressions, similar to those used in Chulia, Martens and van Dijk, [30] and Gospodinov and Jamali [31], are employed. Regressing dummy variables on the first differences of liquidity is employed here to examine the effect of news on liquidity: …”

Section: Impact Of News Releasesmentioning

confidence: 99%

The Efficiency in Liquidity Measures during the US Monetary Announcements

Vortelinos¹,

Γκίλλας²,

Konstantatos³

et al. 2018

TEL

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We examine the impact of US economic news releases in the liquidity of eleven not so extensively researched emerging stock markets. We employ ten liquidity measures. The sample begins from June 2007 up to December 2016. Analysis is performed in a weekly frequency. China is the least liquid Asian market. Peru is the most liquid Latin American market. Most of the emerging markets are positively affected by the US news, offering diversification benefits to international investors. India and Argentina (China and Chile) are the Asian and Latin American countries with the highest (lowest) impacts, respectively. There is not a single best-in-class liquidity measure. The country with the lowest liquidity has the lowest impact from the US news releases. This result holds for both groups of countries in Asia and Latin America.

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“…They report a decrease in stock returns following an increase in the policy rates. Chulia et al (2010) investigate the impact of federal fund target rate decisions on stock returns, volatilities and correlations. They conclude that the expected changes in target rate do not matter but surprises in the target rate change matter which is consistent with market efficiency.…”

Section: Literature Reviewmentioning

confidence: 99%

“…They explain another finding of their study as follows: "..we find that positive surprises in the target rate (bad news for stocks) trigger a stronger reaction in stock prices than negative surprises (good news for stocks)." (Chulia et al, 2010). Andersson (2010) examines the effect of monetary policy decision on bond and stock market volatility in the Euro area and in the US between 1999 and 2006.…”

Section: Literature Reviewmentioning

confidence: 99%