NY FED analysis: FOMC meeting mkt bias

    Posted by hazbin1 on 27th of Jan 2016 at 09:59 am

    the New York Fed re: the upward bias in the 24-hours before an FOMC meeting.

    "We document that since 1994, the S&P500 index has on average increased 49 basis points in the 24 hours before scheduled FOMC announcements. These returns do not revert in subsequent trading days and are orders of magnitude larger than those outside the 24-hour pre-FOMC window. As a result, about 80% of annual realized excess stock returns since 1994 are accounted for by the pre-FOMC announcement drift. The statistical significance of the pre-FOMC return is very high; a simple trading strategy of holding the index only in the 24 hours leading up to right-before an FOMC announcement would have yielded an annualized Sharpe ratio of above 1.1. Other major foreign stock markets exhibit similarly large and significant pre-FOMC returns."

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