Macroeconomic News and Market Reaction: Surprise Indexes meet Nowcasting
Alberto Caruso
No 2018-06, Working Papers ECARES from ULB -- Universite Libre de Bruxelles
Abstract:
Market operators monitor a massive flow of macroeconomic information every day, and react to the nexpected component of the releases. Can we replicate in an automatic way market’s pricing of macroeconomic news? In this paper I show that a "Nowcasting Surprise Index", constructed aggregating forecast errors from a nowcasting model using model-based weights, resembles surprise indexes proposed in the recent literature or constructed by practitioners, which cumulate survey-based forecast errors weighting them using the average news effects on asset prices. This suggests that market operators and a nowcasting model filter the macroeconomic data flow in a similar way, and confirms the link between asset prices and news about macroeconomic indicators. Moreover, the paper shows that a nonnegligible part of asset prices behaviour can be associated to the recent cumulated news in macroeconomic data which carry information about the underlying state of the economy. These results also open a new route for algorithmic trading based on macroeconomic conditions.
Pages: 18 p.
Date: 2018-02
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations:
Published by:
Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/2685 ... SO_macroeconomic.pdf Œuvre complète ou partie de l'œuvre (application/pdf)
Related works:
Journal Article: Macroeconomic news and market reaction: Surprise indexes meet nowcasting (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eca:wpaper:2013/268597
Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/268597
Access Statistics for this paper
More papers in Working Papers ECARES from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels (bpauwels@ulb.ac.be).