Financial Markets Behaviour Around ECB Announcements

Abstract

We analyze the behavior of an array of financial assets around European Central Bank (ECB) monetary policy decisions. We document that European and U.S. equities accumulate sizeable excess returns in the week ahead of an announcement. Pre-ECB announcement returns are stronger from the introduction of euro cash currency up to and including the 2008-2009 peak of the global financial crisis. They fade away afterwards. We generally observe no comparable phenomenon in select currency pairs, government bonds and commodities. We also discover that, in line with existing findings for equities, non-equity assets display no abnormal close-to close returns on announcement day.