Complexity of ECB Communication and Financial Market Trading

We empirically examine how complexity of ECB communications affects financial market trading based on high-frequency data from European stock index futures trading. Our sam-ple covers ECB press conferences between January 2009 and December 2017, during which unconventional monetary policy measures (UMPM) substantially increased communication complexity. Analysing the linguistic complexity of the introductory statements and differen-tiating between press conferences with and without UMPM-announcements, we find more complex communication, i.e. high linguistic complexity and UMPM-announcement, is asso-ciated with a lower level of contemporaneous trading activity. Moreover, complex commu-nication leads to a temporal shift in trading activity towards the subsequent Q&A session, which suggests that Q&A sessions facilitate market participants’ information processing. Finally, we document a relatively lower similarity of unconventional monetary policy state-ments and argue that this might explain our findings