The Rise and Fall of the Pre-FOMC Announcement Drift

Abstract: This thesis builds upon the influential paper "The Pre-FOMC Announcement Drift" by Lucca and Moench that was published in the Journal of Finance in 2015. The authors found that the periods leading up to FOMC announcements were accompanied by large excess returns. We replicate their methodology and employ it study the potential existence of a pre-FOMC announcement drift on the S&P 500 and the OMX30 prior to and following their publication. This study finds empirical evidence of strong preFOMC excess returns for both indices over the years 1994-2015. However, this effect is absent for the years 2015-2019. These findings indicate that the drift has been eroded following the publication by Lucca & Moench, possibly following the logic of the efficient market hypothesis.