DISCUSSION PAPERS IN ECONOMICS AND ECONOMETRICS
Abstract
Discussion Paper No. 1104
Deadline and Welfare Effects of Scheduling Information Releases
By
Anurang N. Banerjee and Giulio Seccia
How should institutions convey relevant information to the public? Should they schedule their communications or release information as it becomes available? What are the welfare effects of an unanticipated information release? We model a decentralized economy and show that a credible schedule delays trade towards the information release date and unanticipated information arrivals entail a loss of insurance opportunities. We apply these findings to the scheduling of monetary policy decisions following the Federal Open Market Committee meetings from 1995 till 2010 and its e_ects on the dynamics of trade on the Federal Funds Futures market. We use the model to empirically identify periods of credible (prior to 2001) and non-credible scheduling (after 2001). Finally we measure the loss in risk-trading activity due to off schedule announcements.
Keywords: Deadline effect, Hirshleifer effect, search in financial markets,
monetary announcements, interest rate futures.
JEL Classification: D83, G12, G14, E58,