Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?

58 Pages Posted: 19 Dec 2016

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: December 8, 2016

Abstract

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

Suggested Citation

Gilbert, Thomas and Scotti, Chiara and Strasser, Georg H. and Vega, Clara, Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact? (December 8, 2016). FEDS Working Paper No. 2015-46. Available at SSRN: https://ssrn.com/abstract=2886812 or http://dx.doi.org/10.17016/FEDS.2015.046r1

Thomas Gilbert (Contact Author)

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

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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