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Notes to myself, possibly of interest to others.
-- Bill Northlich

Wednesday, November 2, 2011

How to make money in the stock market

A recent paper entitled “The Pre-FOMC Announcement Drift,” David Lucca and Emanuel Moench of the Federal Reserve Bank of New York find that U.S. stock prices rise significantly in the 24 hours prior to FOMC announcements but do not rise or fall significantly after FOMC decisions are released to the public. In fact, the authors find that 80% of the equity premium of the S&P 500 index over treasuries from 1994 to 2011 was earned solely on FOMC announcement days, meaning that all other trading days combined accounted for only 20% of the equity premium during this period. The authors also found similar patterns in numerous international equity markets such as France, Germany, Spain, and the United Kingdom.
---via Ritholtz

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