Announcement Effect


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."

BREAKING DOWN '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.

  1. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...
  2. ECB Announcement

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  3. Dividend Policy

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  5. Federal Reserve System - FRS

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

    The cut-off date established by a company in order to determine ...
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  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. How do dividend distributions affect additional paid in capital?

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    According to data published by the NYU Leonard N. Stern School of Business, as of January 2015, the average annual dividend ... Read Full Answer >>
  4. Which retail stocks pay the highest dividends?

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  5. How can the price of a stock change on the ex-dividend date?

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  6. How is the ex-dividend date for a dividend on a stock determined?

    The ex-dividend date is actually determined by the appropriate stock exchange, not by the company paying the dividend. The ... Read Full Answer >>

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