Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149286
Authors: 
Neuhierl, Andreas
Weber, Michael
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6199
Abstract: 
We construct a slope factor from changes in federal funds futures of different horizons. Slope predicts stock returns at the weekly frequency: faster monetary policy easing positively predicts excess returns. Investors can achieve increases in weekly Sharpe ratios of 20% conditioning on the slope factor. The tone of speeches by the FOMC chair correlates with the slope factor. Slope predicts changes in future interest rates and forecast revisions of professional forecasters. Our findings show that the path of future interest rates matters for asset prices, and monetary policy affects asset prices throughout the year and not only at FOMC meetings.
Subjects: 
return predictability
policy speeches
expected returns
macro news
JEL: 
E31
E43
E44
E52
E58
G12
Document Type: 
Working Paper

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