N°25-72: Beyond Words: Fed Chairs' Voice Sentiments and US Bank Stock Price Crash Risk

Building on the methodology of Gorodnichenko et al. (2023), we reconstruct and propose a novel measure that quantifies the voice sentiment of the Chair of the Federal Reserve press conference responses and examine its impact on the stock price crash risk of U.S. banks. We find that a more positive vocal sentiment, indicative of happiness, significantly reduces banks' ex-ante crash risk, whereas negative emotions, such as sadness and anger, amplify it. Our findings suggest that, beyond the textual content of monetary policy statements, the emotional delivery of central bank communication plays a critical role in shaping financial stability outcomes.