Researchers find central bank tone affects asset prices
Thursday, December 8, 2016 - 09:01
in Psychology & Sociology
The researchers found that stock prices increase when central bank tone becomes more positive and decrease when the tone becomes more negative. Positive tone changes are also associated with increasing bond yields, lower implied equity volatility, lower variance risk premia and lower credit spreads. Overall, these results suggest that changes in central bank tone affects the risk appetite of market participants.