Time Series Momentum around FOMC Meetings

Abstract

We document a novel time-series momentum strategy around monetary policy decisions in the US. Stock returns drift upward preceding expansionary monetary decisions and downward before contractionary decisions. The differential pre-drift amounts to 2.5% and increases to 4.5% in the 15 days post policy decision. The differential drift is a pervasive finding across industries, international markets, other asset classes and is concentrated in times of high uncertainty.