We find that the FOMC-announcement-day return premium earned by a firm is positively related to the increase in its ex ante, option-implied skewness prior to the announcement. This finding is consistent with: (1) the existence of an announcement-day Fed put that is partially anticipated by the...

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...