Fed Implied Market Prices and Risk Premia / Charles W. Calomiris, Joanna Harris, Harry Mamaysky, Cristina Tessari.

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Calomiris, Charles W

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w30210.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We introduce FDIF, a measure of Fed communication surprise based on the text of FOMC statements. FDIF measures the difference between text-implied and actual values of key market variables. Positive FDIF of countercyclical variables (e.g., credit spreads) is associated with negative macroeconomic forecast revisions; the opposite holds for procyclical variables. Industries that hedge bad FDIF news earn low returns on FOMC announcement days, but high returns on non-FOMC days. The opposite holds for FDIF-exposed industries, and the return differences are large. Controlling for FDIF exposure, rate-based policy surprise measures are not priced in the cross-section of industry returns.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w30210 (Browse shelf(Opens below))	Not For Loan

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July 2022.

We introduce FDIF, a measure of Fed communication surprise based on the text of FOMC statements. FDIF measures the difference between text-implied and actual values of key market variables. Positive FDIF of countercyclical variables (e.g., credit spreads) is associated with negative macroeconomic forecast revisions; the opposite holds for procyclical variables. Industries that hedge bad FDIF news earn low returns on FOMC announcement days, but high returns on non-FOMC days. The opposite holds for FDIF-exposed industries, and the return differences are large. Controlling for FDIF exposure, rate-based policy surprise measures are not priced in the cross-section of industry returns.