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Complexicity of ECB Communication and Financial Market Trading

We empirically examine how complexity of ECB communications affects financial market trading based on high-frequency data from European stock index futures trading. Our sample covers ECB press conferences between January 2009 and December 2017, during which un-conventional monetary policy measures (...

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Veröffentlicht in:MAGKS - Joint Discussion Paper Series in Economics (Band 19-2019)
Autoren: Hayo, Bernd, Henseler, Kai, Rapp, Marc Steffen, Zahner, Johannes
Format: Artikel
Sprache:Englisch
Veröffentlicht: 2019
Schlagworte:
linguistic complexity
European stock markets
ECB
Wirtschaft
readability
textual analysis
central bank communication
financial markets
Economics
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Zusammenfassung:We empirically examine how complexity of ECB communications affects financial market trading based on high-frequency data from European stock index futures trading. Our sample covers ECB press conferences between January 2009 and December 2017, during which un-conventional monetary policy measures (UMPM) substantially increased communication com-plexity. Analysing the linguistic complexity of the introductory statements and differentiating between press conferences with and without UMPM-announcements, we find more complex communication, i.e. high linguistic complexity and UMPM-announcement, is associated with a lower level of contemporaneous trading activity. Moreover, complex communication leads to a temporal shift in trading activity towards the subsequent Q&A session, which suggests that Q&A sessions facilitate market participants’ information processing. Finally, we document a relatively lower similarity of unconventional monetary policy statements and argue that this might explain our findings.
Umfang:47 Seiten
ISSN:1867-3678
DOI:10.17192/es2024.0614

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