Communicating With Many Tongues: FOMC Communication, Media Coverage, And U.S. Financial Market Reaction

This paper studies the effects of Federal Reserve communications on U.S. financial market returns and volatility over the period from 1998 to 2006. The authors built a new data set that includes information on all Federal Reserve speeches, post-meeting statements, monetary policy reports, and testimony. They also analyze how media coverage affects market reaction. Their results can be summarized as follows: the impact on both returns and volatility is larger if the communication channel is more formal and if the speaker has a more prominent position in the Federal Reserve System.