Hostname: page-component-7d684dbfc8-kpkbf Total loading time: 0 Render date: 2023-10-01T21:02:41.386Z Has data issue: false Feature Flags: { "corePageComponentGetUserInfoFromSharedSession": true, "coreDisableEcommerce": false, "coreDisableSocialShare": false, "coreDisableEcommerceForArticlePurchase": false, "coreDisableEcommerceForBookPurchase": false, "coreDisableEcommerceForElementPurchase": false, "coreUseNewShare": true, "useRatesEcommerce": true } hasContentIssue false

Shaping Expectations and Coordinating Attention: The Unintended Consequences of FOMC Press Conferences

Published online by Cambridge University Press:  08 October 2018


In an effort to increase transparency, the chair of the Federal Reserve now holds a press conference (PC) following some, but not all, Federal Open Market Committee (FOMC) announcements. Evidence from financial markets shows that investors lower their expectations of important decisions on days without PCs and that these announcements convey less price-relevant information. Correspondingly, we show that investors pay more attention to upcoming announcements with PCs. This coordination of attention can reduce welfare in models of the social value of public information. Consistent with theories of investor attention, the market risk premium is larger on days with PCs.

Research Article
Copyright © Michael G. Foster School of Business, University of Washington 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)



We thank Daniel Andrei (the referee), Bruce Carlin, Murray Carlson, Millicent Chang, Jennifer Conrad (the editor), Silvio Contessi, Adlai Fisher, Neal Galpin, Li Ge, Thomas Gilbert, Bruce Grundy, Brian Kelly, Ali Lazrak, Spencer Martin, Silvia Miranda-Agrippino, Pavel Savor, Yuehua Tang, Masahiro Watanabe, James Yae, Jun Yang, and seminar participants at Arizona State University, the Bundenbank, McGill University, Université Laval, the 2016 China International Finance Conference, the 2016 meeting of the European Finance Association, the 2016 Financial Management Association Asia/Pacific Conference, the 2016 Financial Markets and Corporate Governance Conference, the 2016 Financial Institutions Conference, the 2017 Western Finance Association Regulation and Corporate Governance Conference, and the 2016 Accounting and Finance Association of Australia and New Zealand (AFAANZ) Conference for helpful comments and suggestions. We also thank Jeremy Lao and Agha Mirza of CME Group for providing FedWatch support and data. Martineau gratefully acknowledges financial support from the Social Sciences and Humanities Research Council (SSHRC) of Canada, the Montreal Exchange, and the NASDAQ OMX Educational Foundation. Most of the research was done while Grégoire was affiliated with the University of Melbourne.


Abel, A. B.; Eberly, J. C.; and Panageas, S.. “Optimal Inattention to the Stock Market.” American Economic Review, 97 (2007), 244249.CrossRefGoogle Scholar
Abel, A. B.; Eberly, J. C.; and Panageas, S.. “Optimal Inattention to the Stock Market with Information Costs and Transactions Costs.” Econometrica, 81 (2013), 14551481.Google Scholar
Ai, H., and Bansal, R.. “Risk Preferences and the Macroeconomic Announcement Premium.” Econometrica, 86 (2018), 13831430.CrossRefGoogle Scholar
Amador, M., and Weill, P.-O.. “Learning from Prices: Public Communication and Welfare.” Journal of Political Economy, 118 (2010), 866907.CrossRefGoogle Scholar
Amador, M., and Weill, P.-O.. “Learning from Private and Public Observations of Others’ Actions.” Journal of Economic Theory, 147 (2012), 910940.CrossRefGoogle Scholar
Amato, J. D.; Morris, S.; and Shin, H. S.. “Communication and Monetary Policy.” Oxford Review of Economic Policy, 18 (2002), 495503.CrossRefGoogle Scholar
Amengual, D., and Xiu, D.. “Resolution of Policy Uncertainty and Sudden Declines in Volatility.” Journal of Econometrics, 203 (2018), 297315.CrossRefGoogle Scholar
Andersen, T. G.; Bollerslev, T.; Diebold, F. X.; and Vega, C.. “Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange.” American Economic Review, 93 (2003), 3862.CrossRefGoogle Scholar
Andrei, D., and Hasler, M.. “Investor Attention and Stock Market Volatility.” Review of Financial Studies, 28 (2014), 3372.CrossRefGoogle Scholar
Balduzzi, P.; Elton, E. J.; and Green, T. C.. “Economic News and Bond Prices: Evidence from the U.S. Treasury Market.” Journal of Financial and Quantitative Analysis, 36 (2001), 523543.CrossRefGoogle Scholar
Banerjee, S.; Davis, J.; and Gondhi, N.. “When Transparency Improves, Must Prices Reflect Fundamentals Better?Review of Financial Studies, 31 (2018), 23772414.CrossRefGoogle Scholar
Beber, A., and Brandt, M. W.. “Resolving Macroeconomic Uncertainty in Stock and Bond Markets.” Review of Finance, 13 (2009), 145.CrossRefGoogle Scholar
Ben-Rephael, A.; Da, Z.; and Israelsen, R. D.. “It Depends on Where You Search: Institutional Investor Attention and Underreaction to News.” Review of Financial Studies, 30 (2017), 30093047.CrossRefGoogle Scholar
Bernanke, B. S.“Transcript of Chairman Bernanke’s Press Conference, April 27, 2011.” Available at (2011).Google Scholar
Bernanke, B. S., and Kuttner, K. N.. “What Explains the Stock Market’s Reaction to Federal Reserve Policy?Journal of Finance, 60 (2005), 12211257.CrossRefGoogle Scholar
Bjornland, H. C., and Leitemo, K.. “Identifying the Interdependence between US Monetary Policy and the Stock Market.” Journal of Monetary Economics, 56 (2009), 275282.CrossRefGoogle Scholar
Blinder, A. Central Banking in Theory and Practice. Cambridge, MA: MIT Press (1998).Google Scholar
Blinder, A.; Goodhart, C.; Hildebrand, P.; Lipton, D.; and Wyplosz, C.. “How Do Central Banks Talk?” In Geneva Reports on the World Economy 3, London: Centre for Economic Policy Research (2001).Google Scholar
Cieslak, A.; Morse, A.; and Vissing-Jorgensen, A.. “Stock Returns over the FOMC Cycle.” Journal of Finance, forthcoming (2019).CrossRefGoogle Scholar
Cox, J.“Fed’s Powell Says He Will Begin News Conferences following Each Meeting Starting in January.” Available at (2018).Google Scholar
Da, Z.; Engelberg, J.; and Gao, P.. “In Search of Attention.” Journal of Finance, 66 (2011), 14611499.CrossRefGoogle Scholar
Da, Z.; Engelberg, J.; and Gao, P.. “The Sum of All FEARS: Investor Sentiment and Asset Prices.” Review of Financial Studies, 28 (2015), 132.CrossRefGoogle Scholar
Duffie, D., and Sun, T.-S.. “Transactions Costs and Portfolio Choice in a Discrete-Continuous-Time Setting.” Journal of Economic Dynamics and Control, 14 (1990), 3551.CrossRefGoogle Scholar
Fang, L., and Peress, J.. “Media Coverage and the Cross-Section of Stock Returns.” Journal of Finance, 64 (2009), 20232052.CrossRefGoogle Scholar
Fisher, A. J.; Martineau, C.; and Sheng, J.. “Macroeconomic Attention and the Stock Market.” Working Paper, University of British Columbia (2018).Google Scholar
Fleming, M. J., and Remolona, E. M.. “Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information.” Journal of Finance, 54 (1999), 19011915.CrossRefGoogle Scholar
Gertler, M., and Karadi, P.. “Monetary Policy Surprises, Credit Costs, and Economic Activity.” American Economic Journal: Macroeconomics, 7 (2015), 4476.Google Scholar
Gürkaynak, R. S.; Sack, B. P.; and Swanson, E. T.. “Do Actions Speak Louder than Words? The Response of Asset Prices to Monetary Policy Actions and Statements.” International Journal of Central Banking, 1 (2005), 5593.Google Scholar
Gürkaynak, R. S.; Sack, B. P.; and Swanson, E. T.. “Market-Based Measures of Monetary Policy Expectations.” Journal of Business & Economic Statistics, 25 (2007), 201212.CrossRefGoogle Scholar
Huang, L., and Liu, H.. “Rational Inattention and Portfolio Selection.” Journal of Finance, 62 (2007), 19992040.CrossRefGoogle Scholar
Jones, C. M.; Lamont, O.; and Lumsdaine, R. L.. “Macroeconomic News and Bond Market Volatility.” Journal of Financial Economics, 47 (1998), 315337.CrossRefGoogle Scholar
Kacperczyk, M.; van Nieuwerburgh, S. G.; and Veldkamp, L.. “A Rational Theory of Mutual Funds Attention Allocation.” Econometrica, 84 (2016), 571626.CrossRefGoogle Scholar
Kahneman, D., and Tversky, A.. “Prospect Theory: An Analysis of Decision under Risk.” Econometrica, 47 (1979), 263291.CrossRefGoogle Scholar
Kocherlakota, N.“Bring the Fed’s Dead Meetings to Life.” Available at (Oct. 12, 2016).Google Scholar
Kuttner, K. N.Monetary Policy Surprises and Interest Rates: Evidence from the Fed Funds Futures Market.” Journal of Monetary Economics, 47 (2001), 523544.CrossRefGoogle Scholar
Lucca, D. O., and Moench, E.. “The Pre-FOMC Announcement Drift.” Journal of Finance, 70 (2015), 329371.CrossRefGoogle Scholar
Morris, S., and Shin, H. S.. “Social Value of Public Information.” American Economic Review, 92 (2002), 15211534.CrossRefGoogle Scholar
Morris, S.; Shin, H. S.; and Tong, H.. “Social Value of Public Information: Morris and Shin (2002) Is Actually Pro-Transparency, Not Con: Reply.” American Economic Review, 96 (2006), 453455.CrossRefGoogle Scholar
Nakamura, E., and Steinsson, J.. “High-Frequency Identification of Monetary Non-Neutrality: The Information Effect.” Quarterly Journal of Economics, 133 (2018), 12831330.CrossRefGoogle Scholar
Ozdagli, A., and Weber, M.. “Monetary Policy through Production Networks: Evidence from the Stock Market.” Working Paper, University of Chicago (2017).CrossRefGoogle Scholar
Piazzesi, M., and Swanson, E. T.. “Futures Prices as Risk-Adjusted Forecasts of Monetary Policy.” Journal of Monetary Economics, 55 (2008), 677691.CrossRefGoogle Scholar
Ross, S. A.Information and Volatility: The No-Arbitrage Martingale Approach to Timing and Resolution Irrelevancy.” Journal of Finance, 44 (1989), 117.CrossRefGoogle Scholar
Savor, P., and Wilson, M.. “How Much Do Investors Care about Macroeconomic Risk? Evidence from Scheduled Economic Announcements.” Journal of Financial and Quantitative Analysis, 48 (2013), 343375.CrossRefGoogle Scholar
Sims, C. A.Implications of Rational Inattention.” Journal of Monetary Economics, 50 (2003), 665690.CrossRefGoogle Scholar
Stein, J. C.Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements.” American Economic Review, 79 (1989), 3242.Google Scholar
Stein, J. C., and Sunderam, A.. “The Fed, the Bond Market, and Gradualism in Monetary Policy.” Journal of Finance, 73 (2018), 10151060.CrossRefGoogle Scholar
Svensson, L. E.Social Value of Public Information: Morris and Shin (2002) Is Actually Pro Transparency, Not Con.” American Economic Review, 96 (2006), 448452.CrossRefGoogle Scholar
Veldkamp, L. L. Information Choice in Macroeconomics and Finance. Princeton, NJ: Princeton University Press (2011).CrossRefGoogle Scholar
Yellen, J. L.“Transcript of Chair Yellen’s Press Conference, December 17, 2014.” Available at (2014).Google Scholar
Yellen, J. L.“Transcript of Chair Yellen’s Press Conference, June 17, 2015.” Available at (2015a).Google Scholar
Yellen, J. L.“Transcript of Chair Yellen’s Press Conference, September 17, 2015.” Available at (2015b).Google Scholar
Zumbrun, J.“WSJ Survey: Most Economists Don’t See All FOMC Meetings as ‘Live.’” Wall Street Journal (2015). Available at Factiva, doc. no. DJDN000020151008eba80026w.Google Scholar
Supplementary material: File

Boguth et al. supplementary material

Boguth et al. supplementary material 1

Download Boguth et al. supplementary material(File)
File 606 KB