Is the Intrinsic Value of a Macroeconomic News Announcement Related to Its Asset Price Impact?
57 Pages Posted: 25 Apr 2015 Last revised: 12 Sep 2017
There are 4 versions of this paper
Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?
Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?
Is the Intrinsic Value of a Macroeconomic News Announcement Related to Its Asset Price Impact?
Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?
Date Written: September 8, 2017
Abstract
The literature documents a heterogeneous asset price response to macroeconomic news announcements. We relate this heterogeneity to a novel measure of the intrinsic value of an announcement --- the announcement's ability to nowcast GDP growth, inflation, and the federal funds target rate --- and find that differences across the intrinsic values of several U.S. macroeconomic announcements explain a significant fraction of the variation in the impact each of these announcements has on U.S. Treasury yields. We also decompose the intrinsic value into the announcement's relation to fundamentals, a timeliness premium, and a revision premium, and find that the last two characteristics are the most important ones in explaining the heterogeneous response.
Keywords: Macroeconomic announcements, price discovery, learning, forecasting, nowcasting
JEL Classification: G14, E37, E44, E47, C53, D83
Suggested Citation: Suggested Citation