Macroeconomic News Announcements and the Role of Expectations: Evidence for Us Bond, Stock and Foreign Exchange Markets

27 Pages Posted: 21 Feb 2005

See all articles by Suk-Joong Kim

Suk-Joong Kim

The University of Sydney Business School

Michael D. McKenzie

The University of Sydney - Discipline of Finance; University of Cambridge - Cambridge Endowment for Research in Finance (CERF); Financial Research Network (FIRN)

Robert W. Faff

University of Queensland

Abstract

We investigate the impact of scheduled government announcements relating to six different macroeconomic variables on the risk and return of three major US financial markets. Our results suggest that these markets do not respond in any meaningful way, to the act of releasing information by the government. Rather, it is the news content of these announcements which cause the market to react. For the three markets tested, unexpected balance of trade news was found to have the greatest impact on the mean return in the foreign exchange market. In the bond market, news related to the internal economy was found to be important. For the US stock market, consumer and producer price information was found to be important. Finally, financial market volatility was found to have increased in response to some classes of announcement and fallen for others. In part, this result can be explained by differential policy feedback effects.

Keywords: Macroeconomic News, Expectations, Financial Markets, GARCH

JEL Classification: C32, G12

Suggested Citation

Kim, Suk-Joong and McKenzie, Michael David and Faff, Robert W., Macroeconomic News Announcements and the Role of Expectations: Evidence for Us Bond, Stock and Foreign Exchange Markets. Journal of Multinational Financial Management, Vol. 14, No. 4, pp. 217-232, 2004. Available at SSRN: https://ssrn.com/abstract=524585

Suk-Joong Kim (Contact Author)

The University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia
+61 2 9114 0940 (Phone)
+61 2 9351 6461 (Fax)

Michael David McKenzie

The University of Sydney - Discipline of Finance ( email )

Level 2 9 Castlereagh Street
Sydney, NSW 2000
Australia
+61 2 9114 0578 (Phone)
+61 2 9351 6461 (Fax)

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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