Asset Returns and Scheduled Macroeconomic News Announcements

46 Pages Posted: 14 Feb 2009

See all articles by Pavel G. Savor

Pavel G. Savor

DePaul University - Kellstadt Graduate School of Business

Mungo Ivor Wilson

University of Oxford - Said Business School

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Date Written: February 14, 2009

Abstract

Stock market excess returns are significantly higher on days when the government is scheduled to announce inflation statistics, unemployment statistics, and interest rate decisions. The average announcement day excess return from 1958 to 2007 is 10.6 basis points versus 1.4 basis points for all the other days. In contrast, the risk-free rate (measured as the daily return on a 30-day T-bill) is detectably lower on announcement days, consistent with a precautionary saving motive. We show that a simple equilibrium model with deterministically varying aggregate risk can generate higher risk premia and lower risk-free rates around announcements. Our results demonstrate the required trade-off between macroeconomic risk and financial asset returns.

Keywords: Asset Pricing, Macroeconomic Risk, Macroeconomic News

JEL Classification: G12

Suggested Citation

Savor, Pavel G. and Wilson, Mungo Ivor, Asset Returns and Scheduled Macroeconomic News Announcements (February 14, 2009). Available at SSRN: https://ssrn.com/abstract=1342933 or http://dx.doi.org/10.2139/ssrn.1342933

Pavel G. Savor (Contact Author)

DePaul University - Kellstadt Graduate School of Business ( email )

1 E. Jackson Blvd.
Chicago, IL
United States

Mungo Ivor Wilson

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288914 (Phone)

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