One Central Bank to Rule Them All

Both U.S. and international stock markets enjoy high returns and Sharpe ratios on days of scheduled FOMC meetings, consistent with global investors demanding a premium to bear risks associated with Federal Reserve decisions. There is no comparable result for other major central banks, whose announcements do not command positive risk premia either globally or, more surprisingly, domestically. Other macroeconomic announcements have impact on local stock markets and, to some extent, even on the U.S. market. These findings suggest that the Federal Reserve exerts a unique impact on global equity prices that does not simply stem from the size and importance of the U.S. economy.