Self Monitoring or Reliance on Media Reporting: How Do Financial Market Participants Process Central Bank News?

We study how financial market participants process news from four major central banks—the Bank of England (BoE), the Bank of Japan (BoJ), the European Central Bank (ECB), and the Federal Reserve (Fed)—using a novel survey of 195 financial market participants from around the world. Our results indicate that, first, respondents rely more on media reports of central bank events than they do on self-monitoring. The only exceptions are interest rate decisions in the respondent’s home region. In general, the Fed is watched most closely, followed by the ECB, the BoJ, and the BoE. Second, ordered probit estimations reveal that the perceived reliability of media coverage is negatively associated with degree of self-monitoring and positively related to the probability of using media reports, particularly in the case of asset managers. The perceived importance of central bank events is positively related to the degree of self-monitoring in the case of traders. Finally, portfolio managers tend to self-monitor their home central bank more often than do respondents from other parts of the world.