Abstract
This paper analyzes the effects of Swiss National Bank communication on stock investors' uncertainty. Monetary policy news is identified via changes in short- and medium-term futures prices as well as by applying methods from computational linguistics and dictionary approaches to SNB policy statements. Surprises in policy rate changes and regarding the future path of the policy rate exhibit an asymmetric effect on stock investors' uncertainty. Moreover, by taking into account varying topics the SNB addresses in its statements, I show that investors' uncertainty decreases due to an optimistic tone in communications about economic growth. Increased uncertainty expressed in SNB statements translate into increasing stock investors' uncertainty. The results explain how news contained in monetary policy statements reduce noise in financial markets and therefore contribute to financial stability.
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