Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?
58 Pages Posted: 19 Dec 2016
Date Written: December 8, 2016
The literature documents a heterogeneous asset price response to macroeconomic news announcements. We explain this variation with 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 decompose it into the announcement's relation to fundamentals, a timeliness premium, and a revision premium. We find that differences in intrinsic value can explain a significant fraction of the variation in the announcements' price impact on Treasury bond yields. The announcements' timeliness and relation to fundamentals are the most important characteristics in explaining this variation.
Keywords: Macroeconomic announcements, Price discovery, Learning, Forecasting, Now-casting
JEL Classification: C53, D83, E37, E44, E47, G14
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