Description

We find that communication of the votes of FOMC members affects stock returns around the days of announcements. Since votes have been made public through press statements in 2002, stock markets gain value when votes are unanimous but lose value when dissent occurs. This pattern extends to US firm-size and industry portfolios and major international equity indexes. We reject differences in risk, trading volume, expectations of future monetary policy and other coincident events as the likely explanations for the phenomenon. We conclude that the cause lies in dissent votes leading to pessimistic changes in the expectations of the macroeconomic outlook.