Announcement Effect

AAA

DEFINITION of 'Announcement Effect'

The impact on markets from the news that a change will occur at some future date. It can be used as a general term for the reaction to any development that affects trading, such as a change in dividend policy or a stock split. It is most often used, however, to describe investor reactions to changes in monetary policy, such as a hike or cut in a key interest rate level.

Also known as a "signal effect."

INVESTOPEDIA EXPLAINS 'Announcement Effect'

Stock traders eagerly await the announcement of changes in Federal Reserve policy, and stock volumes are notably higher on so-called Fed days; depending on the investment environment, volatility may be substantially heightened as well. Researchers have also found that trading on the day preceding announcements of Fed policy is relatively calm.

RELATED TERMS
  1. ECB Announcement

    An announcement by the European Central Bank (ECB) Governing ...
  2. Dividend Policy

    The policy a company uses to decide how much it will pay out ...
  3. Announcement Date

    1. The date at which a company will announce the details regarding ...
  4. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  5. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...
RELATED FAQS
  1. Why do stock prices change following news reports?

    Stock prices move up and down every minute due to fluctuations in supply and demand. If more people want to buy a particular ... Read Full Answer >>
  2. What is the difference between record date and ex-dividend date?

    The record date of a stock and the ex-dividend date are both important terms that relate to which investors receive dividends ... Read Full Answer >>
  3. Why would a company choose to pay a stock dividend instead of a cash dividend?

    For stock investors seeking instant gratification as a reward for having placed their funds in profitable companies, it would ... Read Full Answer >>
  4. Does the S&P 500 index include dividends?

    The S&P 500 index includes dividends. As of March 2015, the dividend yield for the S&P 500 was 1.91%. This is below ... Read Full Answer >>
  5. How does the bottom line affect shareholder returns?

    The bottom line directly relates to how much a company is able to pay out in dividends to shareholders over a specified time ... Read Full Answer >>
  6. What causes dividends per share to increase?

    There are two primary causes for increases in a company’s dividend per share payout. The first is simply an increase in the ... Read Full Answer >>
Related Articles
  1. Trading Strategies

    The Daily Routine Of A Swing Trader

    From pre-market to after hours, see what you need to do to capture gains quickly.
  2. Active Trading Fundamentals

    Identifying Market Trends

    The success or failure of your long- and short-term investing depends on recognizing the direction of the market.
  3. Forex Education

    How To Trade Forex On News Releases

    When economic data comes out, it can have a marked impact on the currency market. Find out how to profit.
  4. Trading Strategies

    Momentum Indicates Stock Price Strength

    Momentum can be used with other tools to be an effective buy/sell indicator.
  5. Options & Futures

    Minimize Risk With The Long Collar

    Think your favorite stock is on the way down? This simple option-trading strategy can help you manage your risks without selling the stock.
  6. Charts & Patterns

    Are These the Top Dividend Stocks of 2015?

    These dividend-paying companies offer a lot more than just dividends.
  7. Stock Analysis

    How Realty Income Became A Top Dividend Stock?

    Real-estate investment trusts have gained in popularity over the years as income investors look for reliable stream of cash from their portfolios.
  8. Trading Strategies

    American Express: Headwinds and Tailwinds

    Any investors considering a position in American Express need to know these important facts.
  9. Investing

    Using the Dividend Discount Model

    The dividend discount model is a way of applying net present value analysis to estimate the future dividends a stock will pay. Those dividends are then discounted back to their present value. ...
  10. Markets

    Due Diligence On Dividends

    Understanding dividends and how they work will help you become a more informed and successful investor.

You May Also Like

Hot Definitions
  1. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  2. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
  3. Trailing Twelve Months - TTM

    The timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation ...
  4. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known ...
  5. International Financial Reporting Standards - IFRS

    A set of international accounting standards stating how particular types of transactions and other events should be reported ...
  6. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
Trading Center