Is the Intrinsic Value of a Macroeconomic News Announcement Related to Its Asset Price Impact?

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