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

FEDS Working Paper No. 2015-46

58 Pages Posted: 19 Dec 2016 Last revised: 7 Jul 2021

See all articles by Thomas Gilbert

Thomas Gilbert

University of Washington - Department of Finance and Business Economics

Chiara Scotti

Bank of Italy

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: April, 2015

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.

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? (April, 2015). 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

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Georg H. Strasser

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

Sonnemannstraße 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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