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The impact of central bank announcements on asset prices in real time: testing the efficiency of the Euribor futures market

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This paper examines the effect of European Central Bank communication on the price discovery process in the Euribor futures market using a new tick-by-tick dataset. First, we show that two pieces of news systematically hit financial markets on Governing Council meeting days: the ECB policy rate decision and the explanation of its monetary policy stance. Second, we find that the unexpected component of ECB explanations has a significant and sizeable impact on futures prices. This indicates that the ECB has already acquired some credibility: financial markets seem to believe that it does what it says it will do. Finally, our results suggest that the Euribor futures market is semi-strong form informational efficient.

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en

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application/pdf

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http://eprints.lse.ac.uk/19777/1/The_Impact_of_Central_Bank_Announcements_on_Asset_Prices_in_Real_Time_Testing_the_Efficiency_of_the_Euribor_Futures_Market.pdf

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