Title

Can a Non-Event Be an Event? The Case of Bank Stock Returns Surrounding Unexpected Interest Rate Inaction by the Federal Reserve

Document Type

Article

Publication Date

5-25-2020

Publication Title

Journal of Accounting and Finance

DOI

https://doi.org/10.33423/jaf.v20i2.2809

ISSN

2158-3625

Abstract

In September 2015, the Federal Open Markets Committee (FOMC) opted not to act when an increase in interest rates was largely expected. Further, President Yellen’s comments were atypical. We investigate the effect of this announcement on the stock returns of US financial firms; more than a third of which experienced negative abnormal returns. The reaction; however, was not identical across firms indicating differential treatment based on individual firm characteristics. Our results suggest that institution size and classification as a commercial bank are the primary drivers. The outcomes of this study are important as they support the theory of rational pricing and market efficiency.

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