Complexity of ECB communication and financial market trading

Bernd Hayo, Kai Henseler and Marc Steffen Rapp

We examine howthe verbal complexity of ECB communications affectsfi-nancial market trading based on high-frequency data fromEuropean stock index futures trading. Studying the 34 events between May 2009 and June 2017, during which the ECB Governing Council press conferences covered unconventional monetary policy measures, and using the Flesch-Kincaid Grade Level to measure the verbal complexity of introductory statements to the press conferences, we find that more complex communications are associated with a lower level of contemporaneous trading. Increasing complexity of introductory statementsleads to a temporal shift of trading activity towards the subsequent Q&A session, which suggests that Q&A sessions facilitate market participants' information processing.

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Year of publication:	[2019]
Authors:	Hayo, Bernd ; Henseler, Kai ; Rapp, Marc Steffen
Publisher:	Marburg : Philipps-University Marburg, School of Business and Economics
Subject:	ECB \| central bank communication \| textual analysis \| linguistic complexity \| readability \| financial markets \| European stock markets \| Finanzmarkt \| Financial market \| Zentralbank \| Central bank \| EU-Staaten \| EU countries \| Politische Kommunikation \| Political communication \| Kommunikation \| Communication \| Geldpolitik \| Monetary policy \| Aktienmarkt \| Stock market \| Eurozone \| Euro area \| Börsenkurs \| Share price \| Ankündigungseffekt \| Announcement effect