23 Pages Posted: 14 Jun 2014 Last revised: 30 Jul 2015
Date Written: July 29, 2015
Current research of market impact caused by macroeconomic announcements is based on regressing asset returns on macroeconomic surprises, S(t) ~ A(t) – E(t), where A(t) and E(t) are actual and expected (consensus) values of macroeconomic indicators at time t, correspondingly. We found that regressing returns of SPDR ETF SPY on actual change, AC(t) ~ A(t) – A(t-1), and expected change, EC(t) ~ E(t) – A(t-1), yield statistically significant indicators similar to those for S(t). These indicators somewhat vary for the periods 2004-2008 and 2009-2013. The advantage of AC(t) is that it is not based on the subjective nature of consensus. As for EC(t), it does not have a look-ahead bias since E(t) are published a few days prior to A(t). Hence CE(t) can be used for short-term forecasting. We show that with proper fitting, AC-, EC-, and S-based indexes can be used for qualitative modeling the SPY price dynamics. However, the effects of macroeconomic announcements alone do not describe the strength of the bull market in 2009-2014.
Keywords: market impact; macroeconomic announcements; ARMA GARCH model
Suggested Citation: Suggested Citation
Nadler, Daniel and Schmidt, Anatoly B., Market Impact of Macroeconomic Announcements: Do Surprises Matter? (July 29, 2015). Available at SSRN: https://ssrn.com/abstract=2449796 or http://dx.doi.org/10.2139/ssrn.2449796
By Heiko Jacobs