Market disappointment with central bank announcements
Co-authors: Matthieu Picault
Julien and his co-author construct an index capturing market disappointment associated with each central bank announcement for both the Federal Reserve and the European Central Bank. Using text-mining techniques on key financial newspaper articles, they identify sentences conveying market disappointment. Their index uncovers several novel insights: first, market disappointment is frequently reported—occurring in roughly 20% of announcements—and primarily arises from the absence of easing measures. Second, these disappointments trigger immediate revisions in perceived monetary policy rules, highlighting effects not captured by standard surprise measures. Third, disappointed market reactions are associated with significant declines in stock returns and increased volatility in the days following announcements, consistently observed for both Fed and ECB communications. These findings demonstrate the economic significance of market disappointment beyond conventional monetary policy surprises.
