Equity · United States · CFDs, ETFs, futures · Intraday · United States Free

Trading FOMC Announcements with Summary of Economic Projections

Academic paper

Relief Rallies after FOMC Announcements: How Much Do Investors Care About Uncertainty?

AuthorsChen Gu

Institute

Shanghai Business School
?Shanghai Business School - Research Center of Finance

Paper linkhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=2810262

Strategy in a nutshell

An investor buys nearby E-mini S&P 500 index futures contracts five minutes before the FOMC statements including the release of SEP and holds the position for 55 minutes after the announcement

Economic rationale

The author attributes the phenomenon to decreasing uncertainty (as measured by the VIX index) following the FOMC announcements with the SEP, which is especially due to SEP containing information about the future direction of monetary policy.

Backtest performance

Annualised return8.9%

Volatility5%

Beta0.008

Sharpe ratio1.78

Win rate62%

Full Python code

1from AlgorithmImports import *
2#endregion
3
4class TradingFOMCAnnouncementsSummaryEconomicProjections(QCAlgorithm):
5
6def Initialize(self):
7self.SetStartDate(2007, 1, 1)
8self.SetCash(100000)
9
10self.symbol = self.AddEquity("SPY", Resolution.Minute).Symbol
11
12csv_string_file = self.Download('data.quantpedia.com/backtesting_data/economic/fed_summary_economic_projections.csv')
13dates = csv_string_file.split('\r\n')
14dates = [datetime.strptime(x, "%Y-%m-%d") for x in dates]
15
16self.liquidate_next_day = True
17
18self.Schedule.On(self.DateRules.On(dates), self.TimeRules.BeforeMarketClose(self.symbol, 1), self.DayBeforeAnnouncement)
19self.Schedule.On(self.DateRules.EveryDay(self.symbol), self.TimeRules.BeforeMarketClose(self.symbol, 1), self.Rebalance)
20
21def DayBeforeAnnouncement(self):
22if not self.Portfolio[self.symbol].IsLong:
23    self.SetHoldings(self.symbol, 1)
24    self.liquidate_next_day = True
25
26def Rebalance(self):
27if self.liquidate_next_day:
28    self.liquidate_next_day = False
29    return
30
31if self.Portfolio[self.symbol].IsLong:
32    self.Liquidate(self.symbol)