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Macroeconomic Announcement Premium

Author

Listed:
  • Hengjie Ai
  • Ravi Bansal
  • Hongye Guo

Abstract

The paper reviews the evidence on the macroeconomic announcement premium and its implications on equilibrium asset pricing models. Empirically, a large fraction of the equity market risk premium is realized on a small number of trading days with significant macroeconomic announcements. We review the literature that demonstrates that the existence of the macroeconomic announcement premium implies that investors’ preferences must satisfy generalized risk sensitivity. We show how this conclusion generalizes to environments with heterogeneous investors and demonstrate how incorporating generalized risk sensitivity affects economic analysis in dynamic setups with uncertainty.

Suggested Citation

  • Hengjie Ai & Ravi Bansal & Hongye Guo, 2023. "Macroeconomic Announcement Premium," NBER Working Papers 31923, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31923
    Note: AP EFG IFM
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    More about this item

    JEL classification:

    • A0 - General Economics and Teaching - - General
    • E0 - Macroeconomics and Monetary Economics - - General
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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