MAGKS Joint Discussion Paper Series in Economics 19-2019
We examine howthe verbal complexity of ECB communications affectsfi-nancial market trading based on high-frequency data fromEuropean stock index futures trading. Studying the 34 events between May 2009 and June 2017, during which the ECB Governing Council press conferences covered unconventional monetary policy measures, and using the Flesch-Kincaid Grade Level to measure the verbal complexity of introductory statements to the press conferences, we find that more complex communications are associated with a lower level of contemporaneous trading. Increasing complexity of introductory statementsleads to a temporal shift of trading activity towards the subsequent Q&A session, which suggests that Q&A sessions facilitate market participants' information processing.
ECB central bank communication textual analysis linguistic complexity readability financial markets European stock markets