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Fed information effects: Evidence from the equity term structure

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  • Golez, Benjamin
  • Matthies, Ben

Abstract

Do investors interpret central bank target rate decisions as signals about the current state of the economy? We study this question using a short-term equity asset that entitles the owner to the near-term dividends of the aggregate stock market. We develop a stylized model of monetary policy and the equity term structure and derive tests of Fed information effects using the short-term asset announcement return. Consistent with the existence of information effects, we find that the short-term asset return in a 30-minute window around FOMC announcements loads positively on monetary policy surprises. Furthermore, the announcement return predicts near-term macroeconomic growth.

Suggested Citation

  • Golez, Benjamin & Matthies, Ben, 2025. "Fed information effects: Evidence from the equity term structure," Journal of Financial Economics, Elsevier, vol. 165(C).
    • Handle: RePEc:eee:jfinec:v:165:y:2025:i:c:s0304405x24002113
    DOI: 10.1016/j.jfineco.2024.103988
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    More about this item

    Keywords

    Information effects; Term structure; Asset pricing;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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