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Is the intrinsic value of a macroeconomic news announcement related to its asset price impact?

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  • Gilbert, Thomas
  • Scotti, Chiara
  • Strasser, Georg
  • Vega, Clara

Abstract

The literature documents a heterogeneous asset price response to macroeconomic news announcements. We relate this heterogeneity to 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 find that differences across the intrinsic values of several U.S. macroeconomic announcements explain a significant fraction of the variation in the impact each of these announcements has on U.S. Treasury yields. We also decompose the intrinsic value into the announcement’s relation to fundamentals, a timeliness premium, and a revision premium, and find that the former two characteristics are the most important ones in explaining the heterogeneous response.

Suggested Citation

  • Gilbert, Thomas & Scotti, Chiara & Strasser, Georg & Vega, Clara, 2017. "Is the intrinsic value of a macroeconomic news announcement related to its asset price impact?," Journal of Monetary Economics, Elsevier, vol. 92(C), pages 78-95.
    • Handle: RePEc:eee:moneco:v:92:y:2017:i:c:p:78-95
    DOI: 10.1016/j.jmoneco.2017.09.008
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    More about this item

    Keywords

    Macroeconomic announcements; Price discovery; Learning; Forecasting; Nowcasting;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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