We show that the pre-FOMC announcement drift in equity returns occurs mostly in periods of high market uncertainty or risk premium. Specifically, this abnormal return is explained by a significant reduction in the risk premium (implied volatility and variance risk premium) prior to the...

This paper documents a negative relationship between pre-FOMC announcement returns and post-FOMC announcement returns, independent of the state of the economy and sample period. We propose and test a reversal strategy consisting in buying (selling) E-Mini S&P 500 just before the announcement, if...

This paper documents that the ex-ante level of the corporate bond market distress is a good predictor for the pre-FOMC announcement return, subsuming the relevant information of equity market uncertainty highlighted by the previous literature. We compute the orthogonal components of distress and...

This paper explores the relationship between market liquidity and market return around scheduled Federal Open Market Committee (FOMC) meetings. We document that market liquidity on the day prior to the announcement contains useful information to predict the post-FOMC announcement return, which...