What students analyze
This case joins monetary-policy research with market-reaction analysis. Students first estimate the change in the federal funds target range. They also decide whether the Dow and Nasdaq Composite will rise, stay within a chosen return band or fall around the announcement.
The moderator selects the scheduled FOMC meeting date and an index-return band before trading. These are three separate markets: knowing the policy decision alone does not determine the index returns.
Market 1: FOMC decision
What change in the federal funds target range will the scheduled FOMC meeting on {MEETING_DATE} announce?
- Larger cut (more than 25 basis points)
- Cut up to 25 basis points
- No change
- Rise up to 25 basis points
- Larger increase (more than 25 basis points)
Settlement: Use the Federal Reserve’s statement for the selected meeting. Measure the change in basis points using the target range’s upper bound before and after the announcement. A 25-basis-point cut or increase belongs to its respective “up to 25” outcome.
Market 2: Dow Jones Industrial Average
What return will the Dow Jones Industrial Average (^DJI) record around the FOMC announcement on {MEETING_DATE}?
- Positive Dow reaction above +{INDEX_BAND}%
- Dow return within −{INDEX_BAND}% to +{INDEX_BAND}%, inclusive
- Negative Dow reaction below −{INDEX_BAND}%
Settlement: Compare the index’s last regular-session close before the announcement with its first regular-session close after it. The exact band boundaries belong to the middle outcome.
Market 3: Nasdaq Composite
What return will the Nasdaq Composite (^IXIC) record around the FOMC announcement on {MEETING_DATE}?
- Positive Nasdaq reaction above +{INDEX_BAND}%
- Nasdaq return within −{INDEX_BAND}% to +{INDEX_BAND}%, inclusive
- Negative Nasdaq reaction below −{INDEX_BAND}%
Settlement: Apply the same regular-session close-to-close method to the Nasdaq Composite. The case uses index prices, not ETF returns, adjusted closes or after-hours quotes.
Using it in class
Students can weigh Fed speeches, inflation and employment releases, then document why those signals imply a particular policy outcome. The two index markets add a second analytical question: how much of the decision was already expected? Trading makes disagreement visible in prices. After the announcement, the class can compare its policy and return forecasts with the outcomes and discuss the reasoning recorded before settlement.