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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Challo Jeregy who wrote (13255)	7/14/2012 9:24:52 AM
From: John Pitera	5 Recommendations Read Replies (1) \| Respond to of 33421

Another Stunning Study - Yesterday, the Federal Reserve Bank of New York published a study that I found positively jaw-dropping. It is titled "The Puzzling Pre-FOMC Announcement Drift" and is authored by David Lucca and Emanuel Moench. Here is the opening paragraph. For many years, economists have struggled to explain the "equity premium puzzle"—the fact that the average return on stocks is larger than what would be expected to compensate for their riskiness. In this post, which draws on our recent New York Fed staff report [1], we deepen the puzzle further. *We show that since 1994, more than 80 percent of the equity premium on U.S. stocks has been earned over the twenty-four hours preceding scheduled Federal Open Market Committee (FOMC) announcements (which occur only eight times a year)—a phenomenon we call the pre-FOMC announcement "drift." 80% - did they say 80%.....since 1994? We thought "Sell in May" was good because it potentially gave you nearly half a year off. Now you only have to show up eight days.* The report is not light summer reading by any means but it surely breaks new ground. papers.ssrn.com