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 >>
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. 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.
  7. Trading Strategies

    American Express: Headwinds and Tailwinds

    Any investors considering a position in American Express need to know these important facts.
  8. 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. ...
  9. Markets

    Due Diligence On Dividends

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

    Finding Value In A Sideways Market

    When the market is non-directional, your profit potential need not go sideways too.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center