We integrate a high-frequency monetary event study into a mixed-frequency macro-finance model and structural estimation. The model and estimation allow for jumps at Fed announcements in investor beliefs, providing granular detail on why markets react to central bank communications. We find that...

We find evidence of infrequent shifts, or "regimes," in the mean of the asset valuation variable <i>cay_t</i> that are strongly associated with low-frequency fluctuations in the real federal funds rate, with low policy rates associated with high asset valuations, and vice versa. There is no evidence...