Traders may have gained early word on Fed policy, study finds

Section:

By Matthew Boesler
Bloomberg News
Tuesday, May 13, 2014

Some investors between 1997 and 2013 may have gotten early word of changes to Federal Reserve policy and profited by trading before the Fed announced the policy shifts, according to Singapore-based researchers.

Trading records show abnormally large price movements and imbalances in buy and sell orders that are "statistically significant and in the direction of the subsequent policy surprise," according to a paper by Gennaro Bernile, Jianfeng Hu, and Yuehua Tang at Singapore Management University.

The moves occurred before and during the time that reporters were given the Federal Open Market Committee statement in so-called media lockups.

On days the FOMC policy decision deviated from market expectations, "back-of-the-envelope calculations indicate that the aggregate dollar profits" from early access to the statement ranged between $14 million and $256 million, the authors said in the study titled, "Can Information Be Locked Up? Informed Trading Before Macro-News Announcements." ...

... For the rest of the story:

http://www.bloomberg.com/news/2014-05-13/traders-may-have-gained-early-w...



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