IDEAS home Printed from https://ideas.repec.org/a/wly/jfutmk/v26y2006i10p959-995.html
   My bibliography  Save this article

Central bank communications and equity ETFs

Author

Listed:
  • Tao Wang
  • Jian Yang
  • Jingtao Wu

Abstract

This article examines effects of monetary policy surprises on returns, volatilities, trading volumes, and bid–ask spread of two equity ETFs, the S&P 500 SPY fund and the S&P 400 MDY fund. The policy surprises are measured by both surprises in the federal funds rate target changes and surprises in the future direction of the Federal Reserve monetary policy. The results show that there is an overreaction of the SPY to the federal funds rate target surprise in the first 5 minutes' trading and that both the SPY and the MDY returns, volatilities, trading volumes, and bid–ask spread react more strongly to surprise cuts than to surprise increases in the federal funds rate target. Quantitatively, after 45 minutes, an unanticipated 25‐basis‐point cut in the federal funds rate target is associated with an increase of 1.2 and 1.6% in the SPY and the MDY, respectively, while an unanticipated 25‐basis‐point decline (or rise) in the four‐quarter‐ahead eurodollar futures rate is associated with an increase (or decrease) of 0.71 and 0.40% in the SPY and the MDY, respectively. Further evidence also suggests that the market reacts more strongly to surprises in the future direction of monetary policy during the monetary tightening period and that the impact of monetary policy surprises depends on their sizes. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:959–995, 2006

Suggested Citation

  • Tao Wang & Jian Yang & Jingtao Wu, 2006. "Central bank communications and equity ETFs," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 26(10), pages 959-995, October.
    • Handle: RePEc:wly:jfutmk:v:26:y:2006:i:10:p:959-995
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joanne GUO, 2015. "Quantitative Easingand U.S. Financial Asset Returns," Journal of Economics Bibliography, KSP Journals, vol. 2(3), pages 76-105, September.
    2. Rosa, Carlo, 2011. "Words that shake traders," Journal of Empirical Finance, Elsevier, vol. 18(5), pages 915-934.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jfutmk:v:26:y:2006:i:10:p:959-995. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/0270-7314/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.