Time Variation in Asset Price Responses to Macro Announcements

39 Pages Posted: 5 Sep 2013

See all articles by Linda S. Goldberg

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Christian Grisse

Swiss National Bank

Multiple version iconThere are 2 versions of this paper

Date Written: August 2013

Abstract

Although the effects of economic news announcements on asset prices are well established, these relationships are unlikely to be stable. This paper documents the time variation in the responses of yield curves and exchange rates using high-frequency data from January 2000 through August 2011. Significant time variation in news effects is present for those announcements that have the largest effects on asset prices. The time variation in effects is explained by economic conditions, including the level of policy rates at the time of the news release, and risk conditions: Government bond yields increase in response to "good news," but less so when risk is elevated. Risk conditions matter since they can capture the effects of uncertainty on the information content of news announcements, the interaction of monetary policy and financial stability objectives of central banks, and the effect of news announcements on the risk premium.

Keywords: macro-economic news announcements, high-frequency data, bond yields, exchange rates, monetary policy, risk

JEL Classification: E43, E44, E52, F31, G12, G14, G15

Suggested Citation

Goldberg, Linda S. and Grisse, Christian, Time Variation in Asset Price Responses to Macro Announcements (August 2013). FRB of New York Staff Report No. 626. Available at SSRN: https://ssrn.com/abstract=2321203 or http://dx.doi.org/10.2139/ssrn.2321203

Linda S. Goldberg (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Christian Grisse

Swiss National Bank ( email )

Research
Fraumuensterstr. 8
Zuerich, 8022
Switzerland

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