[H.sub.a]: From 1988 to 2007, there is a statistically significant negative relationship between FFRT changes and the S&P 500 index in the short run.
Data for the 87 FFRT changes and corresponding S&P 500 closing values for the time period 1988 to 2007 were collected.
Holding period returns were calculated subsequent to the FFRT change for 5-day, 10-day, 30-day periods, and for the entire interval of time before the FFRT changed again.
Four regressions were conducted using the percentage changes in the FFRT as the independent variable and the 5-day, 10-day, 30-day, and the time-between-rate-changes HPRs as the corresponding dependent variables.
Data analyzed include all 87 FFRT changes from January of 1988 to September 2007.
The regression beta coefficients suggest that changes in the FFRT stimulate opposite changes in the 5-day, 10-day, and 30-day post announcement HPRs.
Table 2 shows the mean of short term S&P 500 HPRs for: the sample of FFRT cuts; the entire sample 87 FFRT changes; and for all possible consecutive 5-day, 10-day, and 30-day HPRs over the 20 year period.
The purpose of this study was to determine whether the announcement of a FFRT change affects stock prices in the short run (5 to 30 days after the announcement) in a manner that would allow an investor to earn an above normal return by following a trading strategy based on such information.