Tone Matters: New Study Finds Fed Chair's Positive Tone Leads Higher Share Prices

A positive attitude goes a long way. For the chair of the Federal Reserve, that sentiment may only be truer.

And it’s not just the sentiment stemming from the leader of the country’s monetary policy. A more positive vocal intonation from any Federal Reserve chair — Jerome Powell, for example — leads to economic expansion and a rise in share prices, according to a new study by the National Bureau of Economic Research.

After reviewing fed chair Q&A press conferences, the authors found that non-verbal communication caused the S&P 500 to increase 100 points five days after the speech occurred.

Fed chair sentiments seem to matter less, according to the paper’s authors, because “market participants tend to look for more information through the aspects which are not explicitly ‘scripted,’ such as the voice tone or body language of the Fed Chair.”

In other words, speculators are trying to read between the lines.