@article {Ben Dor60, author = {Arik Ben Dor and Carlo Rosa}, title = {The Pre-FOMC Announcement Drift: An Empirical Analysis}, volume = {28}, number = {4}, pages = {60--72}, year = {2019}, doi = {10.3905/jfi.2019.28.4.060}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Previous research documented large positive abnormal returns in US equity markets during a 24-hour window immediately preceding Federal Open Market Committee (FOMC) meetings between 1994 and 2011. This anomaly was called the {\textquotedblleft}pre-FOMC announcement drift.{\textquotedblright} This article examines whether this return pattern persisted beyond the original sample end date and whether it is observed in additional asset classes. The equity return during the pre-FOMC window declined from 0.5\% on average per FOMC meeting to roughly 0.1\% in the out-of-sample period after 2011 and was no longer significant. Furthermore, the authors find no evidence of a pre-FOMC announcement effect in US nominal and real interest rates (US Treasuries and Treasury Inflation-Protected Securities), currencies ($/euro, $/British pound, $/Japanese yen, and $/Swiss franc), precious metals (gold and silver), and commodities (oil, heating oil, and natural gas). Results indicate that the pre-FOMC announcement drift was limited to equity markets and weakened significantly post-2011, consistent with market participants taking advantage of the anomaly or with a time-varying effect. However, the fact that the effect weakened postsample, but prepublication, rather than postpublication, may suggest this dynamic was sample specific.TOPICS: Security analysis and valuation, performance measurement, statistical methods}, issn = {1059-8596}, URL = {https://jfi.pm-research.com/content/28/4/60}, eprint = {https://jfi.pm-research.com/content/28/4/60.full.pdf}, journal = {The Journal of Fixed Income} }