The Impact of Central Bank Announcements on Asset Prices in Real Time: Testing the Efficiency of the Euribor Futures Market

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper examines the effect of European Central Bank communication on the price discovery process in the Euribor futures market using a new tick-by-tick dataset. First, we show that two pieces of news systematically hit financial markets on Governing Council meeting days: the ECB policy rate decision and the explanation of its monetary policy stance. Second, we find that the unexpected component of ECB explanations has a significant and sizeable impact on futures prices. This indicates that the ECB has already acquired some credibility: financial markets seem to believe that it does what it says it will do. Finally, our results suggest that the Euribor futures market is semi-strong form informational efficient.

Keywords: market efficiency; central bank communication; news shock; tickby-tick Euribor futures data; event-study analysis. (search for similar items in EconPapers)
JEL-codes: E52 E58 G14 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-cfn, nep-eec, nep-mac, nep-mon, nep-mst and nep-rmg
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Citations: View citations in EconPapers (6)

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Working Paper: The impact of central bank announcements on asset prices in real time: testing the efficiency of the Euribor futures market (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0764

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