Macroeconomic Attention: A State Variable for Announcement Risk Premia?
2017 Financial Intermediation Research Society Conference
2016 ASU Sonoran Winter Finance Conference
49 Pages Posted: 15 Dec 2015 Last revised: 13 Jan 2020
Date Written: January 11, 2020
We construct indices of attention to macroeconomic risks including employment, output growth, and monetary policy. Attention rises around macroeconomic announcements and following changes in fundamentals over quarterly, annual, and business cycle horizons. The effect is asymmetric: Bad news raises attention more than good news. Further, attention to macroeconomic news provides a useful instrument for the level of the risk premium associated with unemployment and FOMC announcements. The findings establish the validity of the proposed empirical measures of macroeconomic attention, and confirm the central predictions of theories of endogenous attention and announcement risk premia.
Keywords: macroeconomic attention, announcement risk premia, endogenous attention, macroeconomic fundamentals
JEL Classification: G12, E20
Suggested Citation: Suggested Citation