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Macroeconomic News and Bond Market Volatility

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Author Info
Charles M. Jones
Owen Lamont
Robin Lumsdaine
Abstract

We examine the reaction of daily Treasury bond prices to the releaseoof U.S. government macroeconomic news. These news releases (of employment and Producer Price Index data) are of interest because they are released on periodic, preannounced dates and because they cause substantial bond market volatility. We investigate whether these non-autocorrelated announcements give rise to autocorrelated volatility. We find that announcement-day volatility does not persist at all, consistent with a simple efficient markets model in which information is incorporated immediately into prices. We also find a large risk premium on these release dates. In contrast, excess returns over Treasury bills are zero on non-announcement dates in our 1979-1993 sample.

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Paper provided by Princeton University, Department of Economics in its series Home Pages with number _005.

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Date of creation: Aug 1996
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Handle: RePEc:wop:priech:_005

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  1. Monika Piazzesi, 2001. "An Econometric Model of the Yield Curve with Macroeconomic Jump Effects," NBER Working Papers 8246, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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