The Greenspan years: an analysis of the magnitude and speed of the equity market response to FOMC announcements

  • Allan A. Zebedee
  • Eric Bentzen
  • Peter R. Hansen
  • Asger Lunde


We examine the impact of monetary policy on the S&P 500 using intraday data. The analysis shows an economically and statistically significant relationship between S&P 500 intraday returns and changes in the Fed funds target rate. The significance and magnitude of the response is dependent on whether the change was expected or unexpected. An expected change in the Fed funds target rate has no impact on prices in the broad equity market; however, an unexpected change of 25 basis points in the Fed funds target rate results in an approximate 48 basis points decline in the broad equity market’s return. The speed of these market reactions is rapid with the equity market reaching a new equilibrium within 15 minutes.


Monetary policy Exchange traded funds High-frequency data 


C22 G11 G12 


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Copyright information

© Swiss Society for Financial Market Research 2007

Authors and Affiliations

  • Allan A. Zebedee
    • 1
  • Eric Bentzen
    • 2
  • Peter R. Hansen
    • 3
  • Asger Lunde
    • 4
  1. 1.Finance Area, School of BusinessClarkson UniversityPotsdamUSA
  2. 2.Department of Operations Management, Management Science GroupCopenhagen Business SchoolFrederiksbergDenmark
  3. 3.Department of EconomicsStanford UniversityStanfordUSA
  4. 4.Department of Marketing and Statistics, Aarhus School of BusinessUniversity of AarhusAarhusDenmark

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