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

See all articles by Thomas Gilbert

Thomas Gilbert

University of Washington - Department of Finance and Business Economics

Chiara Scotti

Board of Governors of the Federal Reserve System

Georg Strasser

European Central Bank (ECB) - Directorate General Research

Clara Vega

Board of Governors of the Federal Reserve System

Multiple version iconThere are 4 versions of this paper

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

Gilbert, Thomas and Scotti, Chiara and Strasser, Georg H. and Vega, Clara, Is the Intrinsic Value of a Macroeconomic News Announcement Related to Its Asset Price Impact? (September 8, 2017). Journal of Monetary Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2598198 or http://dx.doi.org/10.2139/ssrn.2598198

Thomas Gilbert

University of Washington - Department of Finance and Business Economics ( email )

Box 353200
Seattle, WA 98195
United States
206-616-7184 (Phone)

HOME PAGE: http://faculty.washington.edu/gilbertt/

Chiara Scotti

Board of Governors of the Federal Reserve System ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

Georg H. Strasser

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstra├če 20
Frankfurt am Main, 60314
Germany
+496913441416 (Phone)

Clara Vega (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/research/staff/vegaclarax.htm

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