Further Evidence on the Impact of Economic News on Interest Rates
Universite Paris 1 Pantheon-Sorbonne
Université Paris I Panthéon-Sorbonne - CERMSEM; Lombard Odier Darier Hentsch & Cie
October 1, 2009
Frontiers in Finance and Economics, Vol. 6, No. 2, pp. 1-45, 2009
We investigate the shape of the term structure reaction of the US swap rates to announcements using several linear and non-linear time series models. We document the non-linearity of the market reaction to macroeconomic news. First, we find that the introduction of non linear models leads to the finding of a significant number of macroeconomic figures that actually produce an effect over the yield curve. Second, we noticed at least four types of patterns in the term structure reaction of interest rates across maturities, including the hump-shaped one that is generally considered. Third, we propose a first interpretation and classification of these different shapes. Fourth we find that the existence of outliers in interest rates leads to an underestimation of the reaction of interest rates to announcements, explaining the different results obtained between high-frequency and daily datasets.
Number of Pages in PDF File: 45
Keywords: Macroeconomic Announcements, Interest Rates Dynamic, Outliers, Reaction Function, Principal Component Analysis
JEL Classification: G14Accepted Paper Series
Date posted: June 10, 2010 ; Last revised: February 29, 2012
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