Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 2023 erstellt
Beschreibung:
This paper documents that the ex-ante level of the corporate bond market distress is a good predictor for the pre-FOMC announcement return, subsuming the relevant information of equity market uncertainty highlighted by the previous literature. We compute the orthogonal components of distress and uncertainty, and we find that only distress can predict the pre-announcement return, which tends to be positive (negative) when distress is high (low), regardless of the level of uncertainty. These results hold also after 2011, when the average pre-announcement return is flat, but it is possible to predict it using distress