The Fed Day effect is a calendar pattern in which US shares have earned unusually high average returns on and just before the days when the Federal Reserve announces its interest rate decisions. The best-known study, by David Lucca and Emanuel Moench, found that from 1994 the S&P 500 rose by about half a percent on average in the 24 hours before scheduled announcements, a period they called the pre-FOMC announcement drift. These few days each year accounted for a large part of the total return on shares over their sample.
No explanation is settled. Suggestions include a premium for bearing risk ahead of news on monetary policy, a fall in uncertainty as the announcement nears, and the leak of information. The pattern is treated as a possible market inefficiency and studied in news-based trading. Later research suggests it has been weaker and less regular since it was published.