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

Thomas Gilbert (), Chiara Scotti (), Georg Strasser and Clara Vega ()
Additional contact information
Thomas Gilbert: University of Washington
Chiara Scotti: Federal Reserve System, Board of Governors
Clara Vega: Federal Reserve System, Board of Governors

No 874, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: The literature documents a heterogeneous asset price response to macroeconomic news announcements: Some announcements have a strong impact on asset prices and others do not. In order to explain these differences, we estimate a novel measure of the intrinsic value of a macroeconomic announcement, which we define as the announcement's ability to nowcast GDP growth, inflation, and the Federal Funds Target Rate. Using the same nowcasting framework, we then decompose this intrinsic value into the announcement's characteristics: its relation to fundamentals, timing, and revision noise. We find that in the 1998-2013 period, a significant fraction of the variation in the announcements' price impact on the Treasury bond futures market can be explained by differences in intrinsic value. Furthermore, our novel measure of timing explains significantly more of this variation than the announcements' relation to fundamentals, reporting lag (which previous studies have used as a measure of timing), or revision noise.

Keywords: Macroeconomic announcements; price discovery; public information; macroeconomic forecasting; learning; coordination role of public information; central bank policy (search for similar items in EconPapers)
JEL-codes: C53 D83 E27 E37 E44 E47 E5 G1 (search for similar items in EconPapers)
Date: 2015-02-26, Revised 2015-04-23
New Economics Papers: this item is included in nep-mac and nep-mfd
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Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Is the intrinsic value of macroeconomic news announcements related to their asset price impact? (2016)
Working Paper: Is the Intrinsic Value of Macroeconomic News Announcements Related to their Asset Price Impact? (2015)
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